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Hargreaves Services - Considering merger with UK Coal

April 2010

Investing in shares may lose you all or some of your money. Past performance is no indication of future performance. Some of the shares recommended here may be small company shares, which can be relatively illiquid and hard to trade and this makes such shares more risky than other investments.

  • Epic Code:
  • HSP
  • Price:
  • 664p
In response to press rumours, Hargreaves has reported that it is in potential merger discussions with Britain’s largest coal mining company, UK Coal (50.3p; UKC), whose four deep coal mines account for 6% of UK production. UK Coal completed a £100m rights issue last September after breaching bank covenants and the merger discussions are said to be at a very early stage. Deep mines mean risk. UK Coal is also lossmaking due to legacy contracts, which start to unwind next year and the long-term benefits of merging could be huge. In terms of valuation, Hargreaves is on a prospective PE of under 6. It’s so difficult to see just how to make the deal eps enhancing and Gordon Banham is not known to overpay. ...

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