|China’s Yanzhou Coal to Acquire Australian Miner Gloucester for $2.1 Billion|
The fourth largest Chinese coal producer, Yanzhou Coal Mining, has agreed a deal worth $2.1 billion for the purchase of Australia’s Gloucester Coal on Nov 23rd. The large investment amount will be in both cash and shares.
Once approved, the acquisition will grant the state-owned Yanzhou Coal access to more of Australia’s mines and ports. The Chinese company already holds several interests in the resource rich country.
According to the announced plan, Gloucester will become part of Yanzhou unit, called Yancoal Australia, and its shareholders will receive some a$711 million in cash – which filters down to a$3.20 per share.
Additionally, Gloucester’s shareholders will also own 23 percent of the new company’s stock, leaving 77 percent of the stakes to be controlled by Yanzhou.The newly formed company will then be listed as a publicly traded company in Australia.
In a show of confidence, the Chinese company promised to pay up to A$3 per share should the stock price of the new company fall below the A$6.96 limit in the 18 months following the finalization of the move.
Overall, and based on the number of shares involved in the transaction, the deal values the Sydney-based Gloucester at roughly a$10.16 per share. A value that is 45 percent higher than its closing stock price one day before the trading of the stock was halted, on Dec 19th.
The two companies hope to increase annual output to around 25 million metric tons by 2016.
Noble Group, the Singapore-listed commodities supplier that holds 64.5 percent of Gloucester’s shares, has voiced its plans to back the proposal subject to approval by its board of directors. It took a controlling stake in the coal company in 2009 when it offered a$7 per stock.
Recently Noble recorded its first quarterly loss in over a decade, after which Chief Executive Office Ricardo Leiman, resigned from his post. The company’s business is primarily in trading and shipping commodities.
Yanzhou aims to double its coalmines in Australia, the world’s largest exporter of coal, by buying Gloucester.
The takeover, however, is subject on the new merged company obtaining listing rights on the Australian stock exchange, in what would be a major listed coal company in the country.
The deal requires a host of approvals. In addition to pending due diligence reports from both companies, the Chinese and Australian governments as well as the stock exchanges in Australia and Hong Kong, where Yanzhou lists its shares, also need to support the agreement.
An independent expert is awaited to express his view on whether or not it would in the best interests of Gloucester shareholders to go through with the move.
The Chinese firm has recently been highly active in Australian M&A activities, splashing out a$3.1 billion in 2009 when it bought Felix Resources, in China’s largest recorded acquisition of an Australian company.
As part of that deal, Yancoal is expected to list at least 30 percent of its Australian assets by the end of 2012.
It also agreed in September on the takeover of two coal units from Australian retail-to-coal conglomerate Wes farmers for the lesser amount of a$296.8 million.
According to a study compiled by Bloomberg, the increasing demand for coal from China and India, drove this year’s worldwide M&A deals to a record $35 billion, up from $30.3 billion in 2010.
The opinions expressed do not constitute investment advice and specialist advice should be sought about your specific circumstances.
Published on our website on January 5 2012