North firm Hargreaves Services in merger talks with coal giant
Mar 11 2010 by Peter McCusker, The Journal
NORTH East industrial group Hargreaves Services has confirmed it is in merger talks with the UK's biggest coal producer.
The Durham-based energy support services firm has grown rapidly since it was floated on the stock market five years ago this month and now employs 2,600 people, with annual sales of more than £500m.
The stock market listed company has made no secret of its ambition and has made a series of acquisitions including Rotherham’s Maltby colliery and recently raised £115m from banks to fund further purchases.
Hargreaves, which has its headquarters in the former Durham mining village of Esh Winning, confirmed yesterday it had begun talks with UK Coal about a possible £360m merger.
It said: “Hargreaves confirms that, as part of its regular consideration of a range of strategic opportunities, the board is in the early exploratory stages of cautiously reviewing a potential merger with UK Coal.
“Discussions with UK Coal are at a very early stage and there is no certainty that any transaction will result.”
With a market value about a quarter more than that of UK Coal, Hargreaves Services would be the senior partner.
UK Coal, which has four underground mines in Yorkshire and the Midlands and opencast mines in Northumberland, Lancashire, Derbyshire and Leicestershire, posted an £80m loss for the first half of last year.
It says it is keen to reduce its reliance on its deep mines, which are expensive to maintain and have suffered production problems leading to large losses.
The deal will also bring UK Coal’s valuable property portfolio on to the merged company’s books,
In a statement it said: “The exposure of the group to the volatile performance in its deep mines is a significant concern to the directors and mitigating the effects of this exposure, by operating improvements or structural means, is a priority.”
One North East industry analyst said “It is fair to say that Hargreaves is the dominant partner here, but there are benefits for both parties. For UK Coal it will removes it overall reliance on coal mining and for Hargreaves this will transform its size and presence.
“There will be associated cost savings and the deal will ensure there is continuity of supply for Hargreaves in supplying coal to the UK’s largest coal-fired power station Drax.”
It is understood that property and transport firm Peel Group which owns 28% of UK Coal, as well as Durham Tees Valley Airport, is being kept fully informed of developments. Hargreaves shares fell 3% yesterday, while UK Coal rose 3%.
Hargreaves Services also runs a transport division and an industrial services division mainly handling fuel on behalf of power station owners, as well as providing management services to utilities firms including Scottish Power, E.On and British Energy.
UK Coal also has a 43,000 acre portfolio which is mainly located around disused collieries. Some of this land has been earmarked for housing and light industrial redevelopment schemes and is a significant source of potential income.
