4th UPDATE: Aston Resources IPO Share Price Slashed By 27%

Aston Resources Ltd. Friday secured enough commitments to move forward with its A$400 million initial public offering, after slashing the price on the shares on offer by 27% to get the deal done, people familiar with the matter said.

The company is expected to release its prospectus Friday evening, after completing what is called a "back-end bookbuild," in which the underwriters secure institutional investor orders for the deal before marketing the deal to retail investors, one person close to the company said.

The deal is the first major IPO for the Australian market this year, after the multi-billion float of department store Myer Holdings Ltd. (MYR.AU) in November ended up being a disappointment for investors and a few other deals which failed to perform well post-IPO. Investors have been skeptical of how IPOs are priced in Australia, leading German construction company Bilfinger Berger AG to pull the up-to-A$1.39 billion IPO of its Australian arm, Valemus, in July, sparking concerns about Aston's fate.

Aston, a coal company whose prospects hinge on one yet-to-be developed mine, was being marketed earlier this week at A$8.20 a share but that price ended up being cut to A$5.96, one person said. The Aston bookbuild, however, came at the same time that another Australian coal company, Gloucester Coal Ltd. (GCL.AU), was conducting a share issue, which potentially soaked up liquidity. The Gloucester secondary offer came at a 26% discount.

Presumably, the Aston float was timed to capitalize on strong demand for Australian coal assets, which have attracted takeover offers together worth more than US$6 billion so far this year.

Aston, controlled by founder Nathan Tinkler, had originally sought to raise around A$400 million from an IPO and list itself on the Australian Securities Exchange with a market value of about A$1.5 billion, despite paying about a third of that amount for its key asset less than a year ago. At the new share price, the company will have an equity value of A$1.2 billion, one person said.

Tinkler agreed last November to buy the Maules Creek coal prospect, the group's main asset, from Rio Tinto Ltd. (RTP) for US$480 million at a time when the diversified mining giant was continuing its divestment strategy to shore up its balance sheet. Commodity prices at the time, however, had recovered somewhat from the doldrums of late 2008 and early 2009.

The coal property, containing metallurgical and thermal coal, is in the Gunnedah Basin in northern New South Wales state. It is yet to be developed and access to rail and port facilities still need to be finalized.

Tinkler will have a roughly 36% interest in the newly listed entity, one person said, and Asian commodities traders Noble Group Ltd. (N21.SG) and Itochu Corp. (ITOCY) have agreed to become cornerstone investors in Aston. Noble has invested A$58.8 million in the company while Itochu invested A$33 million, the person said.

The group was looking to secure a third cornerstone investor this week. The person said one investor was keen to invest $150 million in Aston but the company rejected the offer because it would have given the investor a more than 10% holding in Aston and the management team wanted to retain their independence.

While it has been challenging to get an IPO completed domestically and the equities market is still jittery, the coal sector is a rare bright spot in Australia. Company share prices have skyrocketed on takeover activity, including Thai miner Banpu PCL's (BANPU.TH) bid for Centennial Coal Co. (CEY.AU) and India's Adani Enterprises bid for a coal property owned by Linc Energy Ltd. (LNC.AU).

The deal activity has been fueled by a gradual recovery in commodity prices, continued projections of high long-term demand for commodities from Asia, and new Australia's Prime Minister Julia Gillard's decision to water down a proposed tax on miners.

After the prospectus is lodged, a small amount of shares will be marketed to retail investors for seven days, one person said. Aston Resources will begin trading in the public market on Aug. 18 under the ticker symbol AZT.

-By Ross Kelly and Cynthia Koons, Dow Jones Newswires; 61-2-8272-4691; Ross.Kelly@dowjones.com

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