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China Attempts Yancoal Takeover

At the beginning of trading, Yancoal shares dropped over 15% to $5.17 after the company announced a surprise revelation that usually investors would benefit from.


According to the announcement, Yancoal’s majority shareholder, China’s state-owned Yankuang Energy, has offered a transaction to acquire enough Yancoal shares to force a takeover.


The release notes that the acquisition structure may be satisfied by the issuance of H-Share Convertible Bonds by Yankuang Energy and could result in the de-listing of Yancoal’s shares from the Australian share market.


In addition, management revealed that the potential transaction values the company well below where the Yancoal share price was trading on Friday. Yankuang Energy’s offer is the equivalent of $5.07 per share, which was 16.6% lower than its last close price.


This is despite Yancoal reporting bumper profits and free cash flow at present thanks to strong demand for coal.


The company stated that Yancoal shareholders should not take any action in respect at this stage and are advised to exercise caution when dealing in Yancoal shares.


Though, given its substantial holding, Yankuang Energy would only need a few other major shareholders (such as Swiss mining giant Glencore). If this occurs, many retail investors will lose out as they will be forced to sell at lower than what they bought in.


The Yancoal board has appointed an independent board committee to evaluate the potential transaction and make a recommendation to independent shareholders.


The committee has also appointed Gilbert + Tobin as its Australian legal adviser and Deloitte Corporate Finance as strategic and commercial adviser.