Yanzhou Said to Plan $2 Billion Purchase of Gloucester Coal
Yanzhou Agrees to Buy Gloucester in A$2.1 Billion Deal
Macarthur Coal Ltd. via Bloomberg
Coal trucks operate at Macarthur Coal Ltd.'s Coppabella Mine southwest of Mackay in Queensland, Australia. Coal deals involving companies in Australia swelled to a record $11.9 billion this year from $9.44 billion in 2010.
Coal trucks operate at Macarthur Coal Ltd.'s Coppabella Mine southwest of Mackay in Queensland, Australia. Coal deals involving companies in Australia swelled to a record $11.9 billion this year from $9.44 billion in 2010. Source: Macarthur Coal Ltd. via Bloomberg
Dec. 14 (Bloomberg) -- Dorris Chen, head of China research for BNP Paribas SA in Shanghai, talks about the outlook for China stocks, monetary policy and her investment strategy. Chen speaks with Rishaad Salamat on Bloomberg Television's "On the Edge Asia." (Source: Bloomberg)
Yanzhou Coal Mining Co. (1171), China’s fourth-biggest producer, plans to buy Australia’s Gloucester (GCL) Coal Ltd. for at least $2 billion, a person with knowledge of the matter said, in what would be its second-largest acquisition.
The cash-and-stock bid for Gloucester, which has a market value of A$1.4 billion ($1.4 billion), will be made by Yancoal Australia, Yanzhou Coal’s Brisbane-based unit, the person said, asking not to be identified as the details are confidential.
Buying Gloucester would give Yanzhou, which approved its first debt sale this month, mines and access to ports in Australia, the world’s biggest coal exporter. Any deal will need support from the Sydney-based company’s controlling shareholder Noble Group Ltd., which last month reported its first quarterly loss in about 14 years.
“A lot of the Yancoal assets are built on promises, saying they will get port and rail allocations, whereas Gloucester has already locked this in with its projects already in production,” Anna Kassianos, senior analyst at Platypus Asset Management Ltd. in Sydney said today by phone. “Yancoal also needs to list by the end of next year, and this is a good way to satisfy the listing requirement.”
Gloucester halted its shares from trading today, flagging a “possible change of control transaction.” It dropped 0.6 percent to A$7.03 in Sydney yesterday, taking its decline for the year to 42 percent. Yanzhou halted its shares from trading in Hong Kong today, pending a “price-sensitive” statement.
Record Year
Coal deals involving companies in Australia swelled to a record $11.9 billion this year from $9.44 billion in 2010, according to data compiled by Bloomberg. The largest transaction was Peabody Energy Corp.’s $4 billion takeover of Macarthur Coal Ltd. in July. The average premium paid globally this year in coal acquisitions is 19 percent, the data show.
Producers are seeking to expand as demand from power utilities and steelmakers rises, while asset prices drop. Global consumption of the fuel is projected to climb by an annual 2.8 percent in the six years to 2016, driven by China’s economic growth, the International Energy Agency said last week.
Buying Mines
Yancoal may spend more than $1 billion buying mines in Australia, Murray Bailey, managing director of the unit, said in a September interview. Yanzhou Coal, which has said it plans an initial public offering of its Australian assets, will use the Gloucester purchase as a means of listing Yancoal in the country, the person said.
Spokesmen for Yancoal and Noble (NOBL) in Australia declined to comment when contacted by phone.
Yanzhou’s shares will be suspended from today because of a “proposed transaction,” according to a statement to the Shanghai Stock Exchange yesterday. The stock has fallen 34 percent in Hong Kong this year. Noble shares have declined 46 percent this year and rose 5.4 percent to S$1.165 in Singapore at 9:49 a.m. local time.
Noble, a Singapore-listed commodities supplier, owns 64.5 percent of Gloucester, according to data compiled by Bloomberg. Noble, whose main business involves trading and shipping bulk commodities including coal, took control of the company in 2009 when it offered A$7 a share. Chief Executive Officer Ricardo Leiman quit last month after Noble reported a third-quarter loss of $17.5 million.
Trading Company
“Noble is a trading company really, and those companies probably don’t have a lot of capital to plough into businesses like” Gloucester, Peter Chilton, who helps manage about $790 million at Constellation Capital Management LLC in Sydney, said by phone. “The real thing is the margins from the marketing, more than owning and physically developing coal mines.”
Buying Gloucester will give Yancoal two coal mines in New South Wales, in the same state as some of Yancoal’s assets. Gloucester also owns a 50 percent stake in the Middlemount coking coal mine in Queensland state.
Yanzhou Coal this month proposed selling as much as 15 billion yuan ($2.4 billion) in bonds over three years. Buying Gloucester would follow its A$3.1 billion acquisition of Felix Resources Ltd. in 2009, in what was China’s biggest takeover of an Australian company at the time.
Australia’s foreign takeover regulator, the Foreign Investment Review Board, ruled at the time of the Felix takeover that Yanzhou must list a minimum of 30 percent of its Australian assets by the end of 2012.
To contact the reporters on this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net; Elisabeth Behrmann in Sydney at ebehrmann1@bloomberg.net
To contact the editors responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net; Rebecca Keenan at rkeenan5@bloomberg.net
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