The Australian Takeovers Panel has intervened to stop coal mining firm Yancoal raising up to $2.3bn in equity, after minority shareholders argued that it could lead to a full takeover of the firm by majority shareholder China's Yanzhou Coal.
Yancoal planned to raise the funds through a renounceable rights offer. It said it needed the money to pay down debt, as well as develop growth opportunities if funds were available.
But $1.8bn of the capital raising would be used to pay back loans from Yanzhou, which had agreed to take up its full entitlement in the rights offer, worth $1.8bn, and to provide new loans of $1.4bn. Yancoal is considering what to do next following the Takeovers Panel's declaration that the circumstances of the capital raising are unacceptable. The Takeovers Panel said the raising could only go ahead with the consent of minority shareholders.
The struggling Yancoal will need to find alternative funding solutions to pay down its debt in a difficult market for Australian coal mining firms. Yancoal made a loss of A$192.7mn ($158.5mn) in the first half of this year. Yancoal, like its counterparts, has suffered from weak thermal and coking coal prices, although the recent slump in the Australian dollar may have helped some of its mines return to profitability.
Australian thermal coal prices have fallen to six-year lows of $61.97/t fob Newcastle for 6,000 kcal/kg NAR grade and $51.86/t for 5,500 kcal/kg NAR coal. The price for premium hard coking coal has remained in the $110-113/t fob Australia range that it has been in for the past six months, closing at $112.45/t on 12 December.
Hong Kong-based investment firm Senrigan Capital Management applied to the Takeovers Panel last month to investigate the Yancoal capital raising, alleging Yanzhou was trying to avoid the need to secure shareholder approval for a full takeover. Yanzhou holds 78pc of Yancoal and could move to compulsorily buy all outstanding shares if it raised its stake to 90pc. Yanzhou's stake in Yancoal could have increased to 98pc if minority shareholders decide not to take up their rights under the offer.
Senrigan's founder has a stake in Yancoal and the investment firm has an interest in the coal producer through cash settled equity swaps.
Hong Kong trading house Noble owns 13.8pc of Yancoal and was unhappy with the proposed equity raising.
Yancoal produces around 20mn t/yr, divided roughly evenly between thermal and coking coal.
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