2nd UPDATE: Whitehaven Coal To Buy Aston Resources For A$2.25 Billion

Whitehaven Coal Ltd. (WHC.AU) said Monday that it has agreed to buy Aston Resources Ltd. (AZT.AU) for A$2.25 billion (US$2.3 billion) in shares, creating Australia's largest independent listed coal producer and greatly boosting its scale to meeting booming demand from Asia.

The complex deal would see Whitehaven pay its shareholders a dividend of 50 cents a share, and also includes an agreement to buy for further shares privately held Boardwalk Resources, a coal prospector partly owned by Aston founder and Chairman Nathan Tinkler.

The need for coal as a fuel and a steelmaking ingredient in China, India and other industrializing countries has spurred a string of tie-ups in recent years as companies have sought out resources. U.S. producer Peabody Energy Corp. (BTU) last month acquired Australia's Macarthur Coal Ltd. for A$4.9 billion, the biggest coal deal this year.

The acquisition will give Whitehaven control of Aston's Maules Creek coal project in New South Wales state, near Whitehaven's own mines in the Gunnedah Basin. The companies would have a resource of about 2.45 billion metric tons, and plans to ramp up production to 25 million metric tons a year by 2016 from a forecast 6 million tons in 2012, the companies said in a statement. By 2016, about 60% of output would be coking coal.

"I believe the merged entity will represent an extremely attractive investment of scale in the rapidly consolidating Australian listed coal sector," said Tinkler, a billionaire who holds 32% of Aston.

The deal, billed by the companies as a merger of equals, follows a failed attempt by Whitehaven earlier in the year to sell itself despite attracting suitors. The deal with Aston is expected to create a company with a market value of about A$5.1 billion.

Analysts expect the combination will offer synergy benefits from marketing, coal blending and rail and port usage, as well as broadening Aston from a single production source and handing Whitehaven what is expected to become a large, low-cost mine.

"The deal is positive in the creation of a significant coal producer controlling the Gunnedah Basin," analysts at Macquarie Equities said in a research report.

The deal has the support of Whitehaven and Aston's boards, as well as Tinkler, who said he plans to vote in favor of the transaction in the absence of a superior proposal. Tinkler's Boardwalk--which has exploration assets in New South Wales and Queensland, plus owns an almost 20% stake in Coalworks Ltd. (CWK.AU)--has been offered about 85.9 million shares worth close to A$500,000, plus a further 34 million shares if it secures two mining leases.

Tony Haggarty, managing director of Whitehaven, will hold the same post at the enlarged company.

"Aston and Whitehaven have complementary assets and teams that make this transaction a compelling," Haggarty said.

At 0309 GMT, Whitehaven's shares were down 2.4% at A$5.68, while Aston's shares were up 1.2% at A$9.87. The benchmark S&P/ASX 200 was up 1.2%.

-By Robb M. Stewart and Ross Kelly, Dow Jones Newswires; [phone]; [e-mail] [e-mail]