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Broken wings

The market volatility has claimed yet another deal – and a second planned demerger – as Aquila Resources cancelled the spin-off of its exploration assets little more than a week before a shareholder vote.

The last-minute cancellation is blamed on the “extreme volatility and uncertainty” in global stock markets over recent weeks, although the company says it may revisit the proposal some time in the future.

This follows a similar decision by the Singapore-based Straits Resources, which cancelled the $1.2 billion de-merger of its coal division last month, also just 10 days before a shareholder vote.

That decision cost the manager, Macquarie Group’s Singapore office, $3.5 million in lost fees, and investment banks can count their missed opportunities from cancelled or proposed transactions in the mining sector alone at tens of millions of dollars.

Both demergers were designed to leverage off soaring commodities prices, but have been left grounded by the subsequent slump as global economic growth forecasts are wound back.

Other asset sales in the coal industry have also been left high and dry.

This includes Aquila’s own strategic review, led by Macquarie Group and Citi, which has been rendered virtually redundant by the company’s share price slump from a year high of $17.90 to around $3.50. The stock fell 20 per cent on Monday after the de-merger cancellation.

Felix Resources, which had hired Citi and Wilson HTM, has also put its sales process on hold after a slump in its share price from more than $23 to $9.

Various floats have also been postponed or are likely to be postponed. This includes the expected $1 billion float of Donaldson Coal, which was to be managed by Macquarie Group, and the mooted $5 billion IPO of Clive Palmer’s Resource Development International, which has retained Macquarie Group and UBS.