Wescoal to acquire coal trading business of MacPhail Distributors

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S.Africa's coal mining company, Wescoal Holdings Ltd, is to acquire the coal trading business, McPhail Distributors Ltd, for 65 million rand

“We have bought all the assets of MacPhail Distributors,” Andre Boje, Chief Executive Officer of Wescoal Holdings told CNBC Africa on Tuesday.

Boje said that the reason for the purchase was to bulk up Wescoal Holdings [DATA WSL:WESCOAL HOLDINGS LTD.] so that they are able to face the increasing competition that has been entering the coal trading space since the economic crises of 2008.

“We had a lot more competition which affected us and MacPhail and that continues to this day so either MacPhail had to bulk up or we had to in order to create a serious player in the trading space again”, Boje explained.

MacPhail will be combined with Wescoal’s current trading division, Chandler Coal Ltd. This will increase their trading division revenue from 300 million to nearly 1 billion rand.

 “MacPhail is a mirror image of Chandler Coal so those 2 will be combining to bulk up to buy coal from other primary producers and on sale to end users, such as the manufacturing industry,” he added.

Boje also believes that the acquisition could potentially add an additional 8 to 10 cents per share to Wescoal’s earnings.

At present, Wescoal’s mining operation supplies all its coal to South African power utility, Eskom, therefore they will not be able to supply coal to their trading division.

“The mining operation will not be able to supply the trading division but one day down the road they will,” he concluded.