Jul 03, 2018 07:12 AM

Yancoal Australia Seeks Dual Listing in Hong Kong

Yanzhou Coal Mining is controlled by Chinese state-owned enterprise Yankuang Group. Photo: VCG
Yanzhou Coal Mining is controlled by Chinese state-owned enterprise Yankuang Group. Photo: VCG

Chinese state-controlled Yanzhou Coal Mining’s Australia-listed unit is seeking a dual listing on the Hong Kong bourse by the end of the year.

The Hong Kong listing plan follows the completion of Yancoal Australia’s $2.69 billion acquisition of Australian coal assets from mining giant Rio Tinto after a bidding war last year with Swiss rival Glencore.

A Hong Kong listing would build on the Rio Tinto deal, which made the company Australia’s largest pure-play coal producer, Yancoal Australia Chief Executive Officer Reinhold Schmidt said Monday in a statement. The dual listing aims to increase liquidity in Yancoal’s shares and help further diversify Yancoal’s investor base, Yancoal Chairman Baocai Zhang said in the statement.

Concurrently with the Hong Kong IPO, the company also proposed a separate campaign to raise capital, in which existing shareholders will have the opportunity to participate on a pro-rata basis, details of which have yet to be finalized. Yancoal didn’t say how much capital it intends to raise.

In addition, the company said it is proposing a 35-for-1 share consolidation to help optimize the company’s capital structure and reduce volatility in its share price. Yesterday the stock closed at 14 Australian cents.

The company will hold a special shareholder meeting in September to vote on the proposal. Controlling shareholder Yanzhou Coal Mining said it intends back the resolution.

The company said it filed the Hong Kong IPO application on a confidential basis. It has yet to disclose a prospectus for the offering. The Hong Kong Exchange requires the disclosure of an IPO prospectus after more details of the capital raising are finalized, the company’s investor relations department told Caixin.

Yanzhou Coal Mining, which is controlled by Chinese state-owned enterprise Yankuang Group, owns almost 66% of the Australian unit. Yancoal said Monday in a statement that the controlling parent’s percentage holding will decrease as a result of the capital raising, but Yancoal will remain a subsidiary of Yanzhou Coal Mining. Cinda International HGB Investment (U.K.) Ltd. currently owns a 17% of Yancoal.

Yancoal appointed Morgan Stanley Asia Ltd., CMB International Capital Ltd., and BOCI Asia Ltd. as joint sponsors, global coordinators, lead managers and book runners in the proposed dual listing and the associated capital raising. Morgan Stanley will also act as the financial adviser.

In 2017, Yancoal reported a net profit of A$229 million ($169 million) on revenue of A$2.6 billion, compared with a net loss of A$227 million on revenue of A$1.2 billion for the prior year.

The company said the financial rebound was directly attributable to the Rio Tinto deal, resulting in “a significant increase in production output at a time of global coal market price improvements.”

The Rio Tinto deal followed three rounds of bidding and months of speculation. Rio Tinto first agreed last January to sell Coal & Allied to Yancoal for $2.45 billion. Then Swiss-based commodities trader Glencore joined the bidding war and offered sweetened terms twice. Yancoal eventually outbid Glencore and completed the deal last September.

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