JOHANNESBURG (miningweekly.com) – Hong Kong-listed Yanzhou Coal Mining Company has proposed the privatisation of its 78%-owned subsidiary Yancoal Australia, the shares of which were currently listed on the ASX.

The detailed terms of the proposed transaction were subject to further negotiations with Yancoal, which owns mines and projects in New South Wales and Queensland, and were yet to be determined.

Yanzhou indicated that, if Yancoal was a wholly owned subsidiary, it would be better positioned to manage and operate a fully integrated business and deliver higher efficiency across its portfolio.

Under the Chinese group’s proposal, it would acquire the remaining 22% of Yancoal’s issued shares from its minority shareholders in exchange for 0.91 Yanzhou CHESS depositary interests (CDIs) for every share held.

The shares underlying the Yanzhou CDIs would be the ‘H’ shares of Yanzhou and the company would apply for a foreign exempt listing of those CDIs on the ASX. Each Yanzhou CDI would confer the same economic entitlements as an ‘H’ share of the company.

The proposed exchange ratio was determined by reference to a value of A$0.91 per Yancoal share, which represented a 30% premium to the 60-calendar-day (ended July 5) volume- weighted average price (VWAP) of Yancoal shares at A$0.70 apiece; and the 60-calendar day VWAP of Yanzhou 'H' shares being HK$7.09 a share.

Yancoal fetched A$0.72 a share on Tuesday, up 4.3% from the previous day’s closing price.

Yancoal said in a statement that its independent directors were considering the proposal from its holding company and that its independent board committee (IBC) would negotiate on behalf of the company.

“Having received the proposal, the Yancoal IBC is undertaking appropriate due diligence investigations to enable it to assess the proposed terms of the proposal and will engage in discussions with Yanzhou before making a recommendation to shareholders,” the company said.

Yancoal hired investment bankers Blackstone Advisory Partners and Lazard, as well as lawyers Minter Ellison to assist in that process.

The transaction would be subject to a number of key conditions, including the agreement of share exchange terms, the execution of definitive transaction documentation and a unanimous recommendation by the independent board committee of Yancoal Australia, among others.

In New South Wales, Yancoal Australia owns the Ashton, Austar, Donaldson, Duralie, Stratford and Moolarben mines and in Queensland it owns Yarrabee, and the Middlemount joint venture with Peabody. It also manages Cameby Downs, in Queensland, on behalf of Yanzhou, as well as Premier, in Western Australia.