Felix Resources gives nod to Yanzhou Coal deal

Updated: 2009-08-15 08:12

By Liu Yi Yu(HK Edition)

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HONG KONG: Australia's Felix Resources has recommended the all-cash offer worth $3 billion from China's Yanzhou Coal Mining Co, making it by far China's largest bid in Australia's natural resources.

Yanzhou Coal Mining, China's fourth-largest coal producer, gained 2.3 percent to HK$12.4 yesterday after the seller's board recommended the deal, which is still subject to an independent expert's report and to winning approval from the Foreign Investment Review Board in Australia as well as from Chinese regulators, according to The Sydney Morning Herald.

Felix rose 4.1 percent to A$17.60 in Sydney trading.

Yanzhou is offering A$16.95 cash for each Felix share, a dividend of A$1.00 a share, and a share-based distribution worth five cents a share in Felix's subsidiary, South Australian Coal Corp, Felix Resources said earlier in a statement.

The total value of the offer is A$18.00 a share, a 6.5 percent premium to Felix's last traded price of A$16.90 before trading suspended on Monday. The current bidding is higher than Yanzhou's offer of A$10 to A$12 in last December and the A$15 asked by Felix's then.

Yanzhou, which is advised by UBS, plans to fund the payment with existing cash resources of $1.8 billion and bank debt.

A spokesman for Yanzhou said the partly state-owned company would retain all Felix's employees and management as well as keep its head office in Australia. The Felix board will also contain some Yanzhou nominees once the deal is completed.

The chairman of Felix, Travers Duncan, said Yanzhou offer gave full value to Felix shareholders and insulated them from the risks associated with Felix's next phase of growth.

Markets are split on whether the buyer is overpaying, as asset prices have made a remarkable rebound through the past half year.

Felix reported profit of A$188 million in the last year, tripled from a year earlier. The Australian company posted record annual coal sales of 4.8 million metric tons in the year through June.

Felix, which has a total coal reserve of 1.38 billion tons as of 2008, expects its growth will mainly be generated from the new Moolarben project in New South Wales, with 610 million tons of power-station coal resources and over 10 million tons of planned annual capacity for the next 20 years.

Yanzhou already owns Austar coal mine in Hunter Valley, Australia, holding 53 million tons in reserve while seeking for high quality resources.

Chinese energy companies have spent at least $12.6 billion on overseas assets since December, among which $9 billion goes to Australia.

(HK Edition 08/15/2009 page2)