RJB Mining targeted by private US group

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The Independent Online

RJB Mining, the former British Coal, looks set to fall into US hands after it emerged the group is in bid talks with Renco, a privately-owned US industrial group.

RJB Mining, the former British Coal, looks set to fall into US hands after it emerged the group is in bid talks with Renco, a privately-owned US industrial group.

It is understood that Renco approached RJB three months ago. Renco is perceived to be an aggressive purchaser of lowly rated businesses which allow it to acquire fixed assets relatively cheaply.

Sources close to the group yesterday indicated that no other companies hadapproached to RJB. RJB said in June it had received an approach, but declined to say where it had come from. That led to speculation that Anglo American, the gold mining giant, Peabody Coal and Drummon Co, the US coal groups might be interested. Anglo this month failed in its bid to acquire North, the Australian iron miner.

RJB again declined to name who is was in talks with yesterday. A spokesman said: "We are still in talks following the approach we told the market of in June."

RJB shares closed down 0.25p at 63.75p on Friday, valuing the business at £93.0m. Some analysts have said Renco could snap up RJB for just £110m.

A formal bid for RJB is unlikely to come ahead of RJB's interim results, due on 7 September and expected to show costs rising sharply at the group in the half year.

RJB's attraction is its vast 40,000 acre land bank. Renco is currently conducting due diligence at RJB and is thought to believe it can extract cost-savings from RJB that have thus far eluded Richard Budge, RJB's chief executive and founder. It is being advised by Credit Suisse First Boston, the investment bank.

"Renco looks for business on the cheap and runs them for profit," one industry observer said. It is not clear what the status of Mr Budge, who enjoys the nickname "King Coal", would be if a deal with Renco goes ahead.

The US group's most famous product is the HumVee all-terrain military vehicle. Its principal coal asset is Rencoal, a US firm, although it also has interest in coal and owns Consolidate American Sewing Machine. Its workforce numbers 15,000.

The group, which turned over $2.5bn (£1.6bn) last year, is one of America's top 50 privately-owned businesses and is headed by billionaire Ira Rennert, who owns 95 per cent of the company. Mr Rennert has come under fire from US environmental campaigners.

RJB employs 7,000 people and operates 13 deep mines and 16 opencast mines. It recently won a five year contract to supply coal to Drax, the UK's largest power station.

The company bought the British government's coal assets for £814m when they were privatised in 1994. It came to the stock market in 1996 priced at 620p a share, but has since seen its shares fall as low as 25p. The group posted pre-tax losses of £130m last year amid increasing competition from cheaper imported coal and a trend towards the use gas for power generation. The government is ploughing £100m into the coal industry. RJB expected to enjoy some £75m in support, a factor the company has said was decisive in its decision not to close its Ellington Colliery in the North-east and Clipstone colliery in Nottinghamshire.

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