China's Yanzhou Coal in talks to acquire Australia's Felix Resources for $2.8 billion
10 August 2009
China's fourth-biggest coal miner, Yanzhou Coal Mining Co, is once again reportedly in talks to acquire Australia's Felix Resources Ltd for approximately $2.8 billion, which could make it China's biggest acquisition in Australian coal industry.
This morning, Felix requested the Australian Stock Exchange to suspended its shares from trading, pending the outcome of negotiations on a potential change of control transaction, while Yanzhou's stock trading was halted at the Hong Kong Stock Exchange.
Yanzhou, which is engaged in underground coal mining, preparation and processing, sale and railway transportation of coal, is reported to fund the acquisition through cash and bank loans.
Felix managing director Brian Flannery had said in December 2008 that the company was open for takeover talks and had confirmed that Felix was in talks with an unidentified company. (See: Chinese coal miner eyes Australia's Felix Resources)
Shandong province-based Yanzhou, majority owned by the Yankuang Group, had been interested in acquiring Felix Resources for over a year, but the talks had broken off in January as the global financial crisis became more severe and prices of coal collapsed.
Yanzhou again entered into negotiations in March, which broke off this time over price disagreements. Yanzhou was willing to pay A$2.35 billion, while Felix shareholders and investors wanted as much as A$2.9 billion.
Felix managing director Brian Flannery and chairman Travers Duncan own 15 per cent stock each of Felix, while Hans Mende, a director in the company, who controls American Metals and Coal International, owns 19.3 per cent and David Knappick, former chief financial officer, owns 7.4 per cent of Felix.
Yanzhou already has a presence in Australia since 2004, when it acquired the Southland mine in NSW for about $30 million.
Yanzhou has once again shown interest in the acquisition of Felix since the global credit market has eased and the prices of commodities have started to pick up.
The deal is reported to be finalised at A$19 a share compared with Felix's last traded price at A$16.90 a share, which would value the Australian miner at approximately A$3.3 billion ($2.8 billion).