Australian Regulator Said to Tell Yanzhou to Cut Yancoal Stake

Australia’s foreign investment regulator told Yanzhou Coal Mining Company Ltd. to abide by an agreement to reduce its stake in local unit Yancoal Australia Ltd. (YAL), said two people with knowledge of the matter.

The Foreign Investment Review Board met with Yanzhou Coal officials last week and reiterated a request to make 30 percent of Yancoal’s shares available to Australian investors by year-end, said the people, who asked not to be identified as the talks were private.

Yanzhou Coal, which owns 78 percent of Yancoal, in July proposed to purchase the rest of the company from shareholders including Noble Group Ltd. (NOBL), a plan that ran counter to FIRB’s requirement. The regulator’s stance means Yanzhou Coal has less than two months to sell at least 8 percent of Yancoal.

Yanzhou Coal’s agreement to cut its stake stems from its purchase of Felix Resources Ltd. for A$3.3 billion ($3.1 billion) in October 2009. After buying Felix, Yanzhou Coal renamed the company Yancoal. At the time, FIRB ruled that Shandong-based Yanzhou Coal must list a minimum of 30 percent of its Australian by the end of 2012.

Last year, Yanzhou Coal bought Gloucester Coal Ltd. and merged it with Yancoal. The combined entity kept Gloucester Coal’s listing and trades in Sydney with a market value of A$711 million. After the Gloucester Coal deal, Yanzhou Coal was given a deadline of Dec. 31 to reduce its Yancoal stake.

FIRB Request

FIRB asked Yanzhou Coal to provide details by Friday on how it plans to complete the sale of the 8 percent Yancoal stake, the people said.

Gemma Daley, a spokeswoman for Australian Treasurer Joe Hockey, who oversees the FIRB, declined to comment. Zhang Baocai, a spokesman for Yanzhou Coal, said the company is still communicating with the regulator and there have been no new developments in the talks.

Noble Chief Executive Officer Yusuf Alireza yesterday on a conference call declined to comment on his company’s stance on Yancoal. Noble had asked for better terms for its 13 percent stake in Yancoal, the people said.

Yanzhou Coal’s July proposal valued Yancoal at 69 Australian cents a share, or A$151 million for the 22 percent stake the Chinese company was seeking, RBC Capital Markets said at the time. Yancoal closed yesterday at 73.50 cents in Sydney trading.

Yancoal operates seven mines in Australia’s New South Wales and Queensland states, and is a shareholder in two ports, according to its website.

To contact the reporter on this story: Brett Foley in Melbourne at bfoley8@bloomberg.net

To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net

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