China’s Yanzhou Coal to buy Australia’s Gloucester

China’s Yanzhou Coal to buy Australia’s Gloucester

KELVIN CHAN
Published: Dec 23, 2011 4:15 PM
HONG KONG (AP) – Yanzhou Coal Mining Co. is buying Australia’s Gloucester Coal Ltd. in a $2.2 billion deal that will create one of Australia’s biggest listed coal miners and give the Chinese state-owned company access to more mines and ports.

Gloucester said Friday that it will become part of a Yanzhou unit, Yancoal Australia Ltd., which will be listed on the Australian Securities Exchange. Yanzhou will own 77 percent of the new company. The rest will be owned by Gloucester shareholders, who will get one share in the new company for each of their Gloucester shares.

Yanzhou will also pay Gloucester shareholders 700 million Australian dollars ($711 million) in cash, or A$3.20 a share.

The Chinese company will also compensate shareholders up to AU$3 a share if Yancoal Australia’s share price falls below A$6.96 in the 18 months after the deal closes. The deal values the company at AU$10.16 a share, or AU$2.2 billion ($2.2 billion) based on the number of shares involved.

Gloucester will bring most of its coal mines in Queensland and New South Wales states to Yancoal, doubling the Chinese company’s coal mines in Australia.

Yanzhou said the deal would help speed development of its Moolarben mine in New South Wales by using Gloucester’s spare port capacity.

The deal is the latest by Chinese state-owned resource companies investing in Australia to secure access to commodities that help fuel China’s strong economic growth.

The deal is subject to a raft of approvals, including due diligence reports from both companies and an independent expert’s opinion on whether it’s in the best interests of Gloucester shareholders. The Chinese and Australian governments and stock exchanges in Australia and Hong Kong, where Yanzhou shares are listed, also need to give their blessing.

Gloucester said its biggest shareholder, Singapore commodity trader Noble Group Ltd., which owns a 64.5 percent stake, would vote in favor of the transaction.

In 2009, Yanzhou bought another Australian miner, Felix Resources Ltd., in a $3.2 billion deal that was China’s biggest investment in the Australian minerals industry at the time.

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Kristen Gelineau in Sydney contributed to this report.p

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