Shares in UK Coal up on confirmation of takeover talks

Shares in UK Coal, Britain's largest coal producer, rose more than 8.5 per cent yesterday, as the loss-making company confirmed it had received a bid approach from an unnamed party.

Shares in UK Coal, Britain's largest coal producer, rose more than 8.5 per cent yesterday, as the loss-making company confirmed it had received a bid approach from an unnamed party.

In a Stock Exchange announcement the company said it had received a "highly preliminary and tentative approach" several weeks ago, which was subject to "a number of terms and preconditions".

UK Coal said although it had asked the bidder for clarification on several of the details, no response had been received. The company added that it had not received any further approaches. It said: "There has been no substantive response to the company's request for clarification. Accordingly, shareholders should note there can be no certainty that any offer for the company will be forthcoming."

Shares in UK Coal closed 10.75p higher at 136.5p, giving the company a market value of £199m. Its stock remains well below the highs of more than 170p it hit last August.

After announcing bigger-than-expected first-half losses last summer, the group replaced its chief executive Gordon McPhie with Gerry Spindler, a US coal-mining veteran. The company then reported even larger full-year losses of £52m last month - its fourth consecutive year of losses - after failing to take advantage of soaring coal prices. As a result, the company slashed its dividend by 80 per cent to 1p.

UK Coal also faced threatened legal action from Drax Power this year, after the company was unable to meet its contract to supply the country's largest coal-fired power station. Mr Spindler admitted yesterday the group had a disastrous year, but said it would be back in profit by 2006.

UK Coal has undergone a transformation in recent years after the departure of its long-term chief executive, Richard "King Coal" Budge, in 2001.

Mr Budge, who founded the group in 1994 under the name RJB mining, left the company after a boardroom dispute over the redevelopment of the Thorne mine in Yorkshire. The group changed its name to UK Coal in May 2001. After subsequently trebling its debt, UK Coal received a £75m aid package from the Government in September 2002 when it closed its Selby and Prince of Wales mines.