Yanzhou Coal Mining of China is in an $8-billion merger talks with Gloucester Coal of Australia. In anticipation of the takeover, Gloucester (ASX: GCL) will halt trading on its stocks on Tuesday.
Gloucester told the Australian Stock Exchange that the trading halt would be until Dec 22 due to a potential merger proposal. Gloucester has a market value of $1.43 billion. At its last trade, Gloucester shares were at $7.03.
Yancoal's Board Secretary and Deputy General Manager Zhang Baocal was quoted by Deal Journal Australia last week that the Chinese firm is studying a reverse takeover in fulfillment of its commitment to Australia's regulators.
Among the reasons for the likely buy-in by Yancoal Australia are the volatile equity market and the preference of Gloucester's majority shareholder, Noble Group which has a 64.5 per cent stake, to become minority stakeholder.
When Yanzhou acquired Felix Resources in 2009 for $3.1 billion, it assured the Foreign Investment Review Board that it will list at least 30 per cent of its Australian subsidiary by 2012 to address politicians' concern about the large amount of Chinese investment in Australia's resources industry.
Yanzhou Coal, China's fourth-largest producer of coal, plans to sell up to $2.4-billion bonds over the next three years.
Coal producers in Australia are expanding due to higher demand from power utility firms and steelmakers. Global consumption of coal is forecast to go up 2.8 per cent yearly up to 2016 with China's economic growth as its main driver, the International Energy Agency said.
In July, Peabody Energy took over Macarthur Coal for $4 billion. As a result, coal deals involving Australian companies jumped to $11.9 billion for 2011 from $9.44 billion in 2010.