15-12-2014, 10:24 PM
Yancoal debt deal with Yanzhou in doubt after Takeovers Panel ruling
THE AUSTRALIAN DECEMBER 15, 2014 5:04PM
Sarah-Jane Tasker
Reporter
Sydney
Murray Bailey, chief executive officer of Yancoal Australia Ltd., a unit of Yanzhou Coal Mining Co., stands for a photograph...
Murray Bailey, chief executive of Yancoal Australia. Picture: Brendon Thorne/Bloomberg Source: Supplied
CHINESE giant Yanzhou’s debt deal with its Australian interest, Yancoal, is in doubt after the Takeovers Panel ruled it needs shareholder approval.
Earlier last month Yancoal announced a $US2.3 billion ($2.8bn) debt deal that would see 78 per cent shareholder Yanzhou take on $US1.8bn of the subordinated capital note offer.
Under the offer, open to all shareholders, Yancoal would issue 2.32112 subordinated capital notes for every 100 Yancoal shares held. The notes would be treated as equity.
If the minority shareholders shun the offer, Yanzhou could increase its holding to about 98.8 per cent of Yancoal.
Minority shareholder Senrigan Capital had complained to the panel that the deal would enable Yanzhou to convert its subordinated capital notes into equity at depressed prices “so as to permit the compulsory acquisition of minorities cheaply”.
The panel ruled that the deal constituted “unacceptable circumstances”. It said to continue with the deal, Yancoal had to seek shareholder approval, excluding its majority shareholder, Yanzhou.
Yancoal said yesterday it was considering the Takeovers Panels decision and its next steps. Yancoal had previously said it believed that the application to the panel had no merit.
Senrigan, which has a stake of less than 0.6 per cent in Yancoal, had requested the offer not go ahead until the conclusion of panel proceedings, but it also sought, as an alternative, that the rights offer be made subject to shareholder approval.
Hong Kong commodities trader Noble Group has a 13.8 per cent stake in Yancoal and is understood to be unhappy with the offer.
If Noble Group, which also has a marketing agreement with Yancoal, does not take up the offer, it will be diluted to a 0.7 per cent holding in one of Australia’s largest listed pure coal plays. The trader has declined to comment on the deal.
The Takeovers Panel outlined in its ruling that the notes were a complex security that required a significant capital contribution and were unattractive to Yancoal shareholders other than Yanzhou.
“The steps taken to minimise the control effect of the rights offer are not sufficient, including the discount conversion price which exacerbates the potential control effect. And compulsory acquisition may occur at a cheaper price than would be
the case through ordinary acquisitions of shares,” the panel said.
The panel also said that Yanzhou could, from time to time, without shareholder approval, convert subordinated capital notes that allowed it to maintain, but not increase, its voting power in Yancoal.
On the recommended shareholder vote on the debt deal, the panel said at least 50 per cent of votes cast were needed to approve the deal.
THE AUSTRALIAN DECEMBER 15, 2014 5:04PM
Sarah-Jane Tasker
Reporter
Sydney
Murray Bailey, chief executive officer of Yancoal Australia Ltd., a unit of Yanzhou Coal Mining Co., stands for a photograph...
Murray Bailey, chief executive of Yancoal Australia. Picture: Brendon Thorne/Bloomberg Source: Supplied
CHINESE giant Yanzhou’s debt deal with its Australian interest, Yancoal, is in doubt after the Takeovers Panel ruled it needs shareholder approval.
Earlier last month Yancoal announced a $US2.3 billion ($2.8bn) debt deal that would see 78 per cent shareholder Yanzhou take on $US1.8bn of the subordinated capital note offer.
Under the offer, open to all shareholders, Yancoal would issue 2.32112 subordinated capital notes for every 100 Yancoal shares held. The notes would be treated as equity.
If the minority shareholders shun the offer, Yanzhou could increase its holding to about 98.8 per cent of Yancoal.
Minority shareholder Senrigan Capital had complained to the panel that the deal would enable Yanzhou to convert its subordinated capital notes into equity at depressed prices “so as to permit the compulsory acquisition of minorities cheaply”.
The panel ruled that the deal constituted “unacceptable circumstances”. It said to continue with the deal, Yancoal had to seek shareholder approval, excluding its majority shareholder, Yanzhou.
Yancoal said yesterday it was considering the Takeovers Panels decision and its next steps. Yancoal had previously said it believed that the application to the panel had no merit.
Senrigan, which has a stake of less than 0.6 per cent in Yancoal, had requested the offer not go ahead until the conclusion of panel proceedings, but it also sought, as an alternative, that the rights offer be made subject to shareholder approval.
Hong Kong commodities trader Noble Group has a 13.8 per cent stake in Yancoal and is understood to be unhappy with the offer.
If Noble Group, which also has a marketing agreement with Yancoal, does not take up the offer, it will be diluted to a 0.7 per cent holding in one of Australia’s largest listed pure coal plays. The trader has declined to comment on the deal.
The Takeovers Panel outlined in its ruling that the notes were a complex security that required a significant capital contribution and were unattractive to Yancoal shareholders other than Yanzhou.
“The steps taken to minimise the control effect of the rights offer are not sufficient, including the discount conversion price which exacerbates the potential control effect. And compulsory acquisition may occur at a cheaper price than would be
the case through ordinary acquisitions of shares,” the panel said.
The panel also said that Yanzhou could, from time to time, without shareholder approval, convert subordinated capital notes that allowed it to maintain, but not increase, its voting power in Yancoal.
On the recommended shareholder vote on the debt deal, the panel said at least 50 per cent of votes cast were needed to approve the deal.