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Australia approves huge Chinese coal takeover

Last Updated: Thursday, March 8, 2012 - 19:04

Sydney: Australia Thursday cleared the way for China's Yancoal to take over miner Gloucester Coal in a multi-billion-dollar deal that gives Beijing a greater foothold in the resource-rich country.

Treasurer Wayne Swan said the country's foreign investments watchdog had green-lighted the deal under strict conditions that the new company remain headquartered in Australia and list on the stock exchange by the end of 2012.

Regulatory approval was the major hurdle to the deal, which will lead to the creation of Australia's largest listed coal firm, which local media said would be valued at USD 8-9 billion, with resources of some 3.4 billion tonnes.

Under the proposal Gloucester's shareholders are to receive about Ausralian Dollars 639 million and a 22 percent stake in the new combined company, which has forecast production of 25 million tonnes per annum by 2016.

The deal -- which was valued at Ausralian dollar 2.2 billion when announced in December -- is China's latest foray into Australia's mining market as its leaders try to secure resources for its rapidly expanding economy, the world's second largest.

However, Beijing's interest in Australia has raised concerns over China's influence in the country, which Swan attempted to soothe by placing several conditions on the merger.

"I approve the application by Yancoal Australia Limited to merge with Gloucester Coal Limited, subject to several legally enforceable conditions... that reflect the significance of coal production to the Australian economy," Swan said in a statement.

"Yanzhou's (Yancoal's parent company) investment in the Australian coal industry will allow for the further development of Australia's coal deposits, which will have positive impacts on employment and growth in the sector and more broadly for the economy."

Yancoal, the Australian subsidiary of China's Yanzhou Coal, has described the as-yet-unnamed new firm as the "leading listed pure-play coal company in Australia and the ninth-largest globally based on reserves."

It comes amid furious consolidation in the coal industry as fast-industrialising China and India hunt for energy resources to fuel their booming economies.

Australia's coal industry is dominated by major global players BHP Billiton, Rio Tinto and Xstrata, but smaller firms are being targeted as competition heats up.

US-based Peabody Energy, the world's largest private coal miner, snapped up Australia's Macarthur Coal in November in a deal worth almost Australian Dollar 5 billion.

Swan said Yanzhou would have to reduce its ownership of the new company to less than 70 percent by the end of 2013 and also sell down its share of two other firms excluded from the merger, Syntech Resources and Premier Coal.

He warned that all coal produced by the new firm would have to be marketed on "arms-length" terms from the Chinese government and sold at international benchmark rates.

State-owned Yanzhou, China's third-largest listed coal company by output, approached Gloucester after taking over coal miner Felix Resources in 2009 in a USD 3.2 billion deal -- at the time the biggest by a Chinese firm in Australia.

The Felix tie-up followed a series of knock-backs and withdrawal of Chinese deals after the foreign investment board imposed strict conditions, inflaming tensions which followed Rio Tinto snubbing a USD 19.5 billion Chinalco deal.


First Published: Thursday, March 8, 2012 - 19:04
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