re: Ann: Updated - Scheme Meeting and General...
Gloucester Coal, Yancoal Australia
Gloucester Coal shareholders enthusiastically embraced the 'merger' proposal from China-backed Yancoal Australia, with almost 100 per cent of them getting behind the $8 billion deal.
The Australian coal company’s shareholders will receive $3.15 in cash and 22 per cent of the merged company, while Yancoal Australia, owned by Chinese giant Yanzhou Coal, will take the remaining 72 per cent. As such, Yancoal will dominate the board.
The complexity of the deal, effectively a takeover via merger, has made firm valuations harder to come by. But the early signs are that China’s largest single foray into the Australian coal sector has been a good deal for Gloucester and a bad deal for Beijing.
Independent expert Deloitte has valued the bid as high as $9.48, but analysts appear to have settled on something closer to $8.70. Gloucester shares finished trading yesterday around six-month lows at $6.75.
Gloucester and Yancoal announced the deal just before Christmas, when Port of Newcastle thermal coal was trading at $US121 a metric tonne. Since then, Australian coal prices have come off 11 per cent. Gloucester shares have fallen much harder, shedding 22 per cent since April.
However, imagine how it might have looked if China had tried to play hardball on the price for Gloucester. Consider the history of Felix Resources.
Felix was acquired by Yanzhou in 2009 with a number of conditions that Yancoal was supposed to meet by the end of this year. In March, Treasurer Wayne Swan approved Yancoal’s takeover of Gloucester and gave the Chinese-owned company more time to meet those conditions.
While the price mightn’t be ideal for Yancoal, and more broadly for China, in isolation it secures supply of a commodity that the emerging economics powerhouse needs desperately in any case to meet its rising energy needs.
The deal is set to create Australia’s largest independent coal company. With the Australian Foreign Investment Review Board giving the green light, all we’re waiting on is approval from Chinese regulators.
GCL Price at posting:
$6.75 Sentiment: None Disclosure: Not Held
