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UK Coal considers early-stage merger approach, denies press speculation regarding major shareholder

In response to speculation in the Daily Mail, UK COAL (LSE: UKC) said it is "not aware of any proposal from the group's major shareholder or any other source". Whilst refuting the media reports, the company informed investors that it has received a very early stage merger proposal from an unnamed party.

According to Daily Mail reporter Geoff Foster, there is speculation that UK Coal’s major shareholder Peel Holdings, with a 28.3% of the company, rejected an approach for its stake. The Daily Mail reported that Peel, which is controlled by British property tycoon John Whittaker, is preparing its own cash-offer for the company.

In its statement to the London Stock Exchange, UK Coal stated that it is at a "very early stage of investigating an approach it has received which could address the group's exposure to the volatile performance of its deep mines through a merger transaction". The company emphasised that the proposal is highly conditional, it is at a very preliminary stage and no view can be expressed as to whether such a transaction will result.

The volatile performance of 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, UK Coal said.

UK Coal noted that it has encountered continuing difficulties in the performance of its deep mines in recent months, which is having a material impact on its financial position. As previously reported, the company’s Daw Mill Colliery in the West Midlands has encountered delays. UK Coal said that preparation for production at the new face was hindered by difficult geological conditions and, as a result, the start of production on the new face is now expected during April, rather the end of March.

Disclosure: The author holds no positions in the company