A not unexpected response from the independent directors of Chinese-controlled Yancoal Australia to a lower than market takeout offer from its parent.
A committee of independent directors deemed the $1.8 billion offer from Yankuang Energy unreasonable in its current form.
Yankuang Energy is the major shareholder of Yancoal (with 62%), filed documents with the Hong Kong stock exchange in late May suggesting it was considering a $US3.60 ($A5.01) a share bid to acquire the remaining stake in the coal miner.
This was to be done through the issuance of convertible bonds and would potentially result in Yancoal’s delisting from the Hong Kong stock exchange and/or the ASX.
Convertible bonds are not used in takeovers in Australia – it’s mostly cash or fully paid ordinary shares.
The suggested price was at a big discount to the then Yancoal Australia share price of $6.08.
Yesterday in a statement to the ASX, the independent board committee which was appointed in the wake of the bid, indicated the transaction would not be in the best interests of the company’s minority shareholders.
The Committee comprises all non-executive directors who do not have any direct or indirect interest in the potential transaction, other than as a Yancoal shareholder.
Yancoal said initial concerns stemmed from Yankuang Energy’s valuation being a discount to the prevailing trading prices on the ASX and the Hong Kong stock exchange.
The $US3.60-per-share bid reflected a 14.49% discount to Yancoal’s last closing price of $HK33.05 ($US4.21) on the Hong Kong stock exchange on May 25.
The rationale for the offer (and the use of the hard-to-understand convertible bonds by the Chinese parent) has never been adequately explained.
At one stage there were stories that the lowball bid was a peculiar attempt to get Glencore to sell its 6% at a low price. That argument went nowhere and it seems from recent well-informed stories about Glencore’s possible future course of action, that the resource giant is simply not interested.
Yancoal reaffirmed that its shareholders should not take any action regarding Yankuang Energy’s potential bid.
“There is no certainty that the potential transaction will proceed, materialise or be consummated,” Yancoal said in a statement on Tuesday.
“Yancoal shareholders and potential investors are therefore advised to exercise caution when dealing in the shares and/or other securities of Yancoal.”
During the evaluation process, the committee said it took advice from Gilbert + Tobin as an Australian legal adviser, Freshfields Bruckhaus Deringer as a Hong Kong legal adviser, and Deloitte Corporate Finance as strategic and commercial adviser.
The rejection saw Yancoal Australia shares rise 4% to $5.66.
