Yanzhou Coal Mining Co. climbed in Hong Kong and Shanghai trading after Felix Resources Ltd. recommended its shareholders accept a A$3.5 billion ($3 billion) takeover offer from China’s fourth-biggest coal producer.
Yanzhou gained as much as 7.3 percent in Hong Kong and jumped by the 10 percent trading limit in Shanghai. The Hong Kong shares climbed 1.7 percent to HK$12.32 at 11:36 a.m. while the Hang Seng Index was down 0.6 percent. Felix rose 4.6 percent to A$17.67 in Sydney trading.
Yanzhou will pay A$18 a share for Felix, including a dividend and stock in a unit, Brisbane-based Felix said yesterday. The acquisition is China’s biggest in Australia since Rio Tinto Group rebuffed a $19.5 billion investment from state- owned Aluminum Corp. of China in June.
“We view the acquisition positive to Yanzhou, as the company puts excess cash to use,” Credit Suisse Group analysts Trina Chen, Kevin You and Ada Dai said in a report today. “We estimate the proposed acquisition to boost earnings by 14 percent for 2010 earnings, and 37 percent by 2011 earnings.”
Chinese energy companies have spent at least $12.6 billion on overseas assets since December as they take advantage of lower valuations caused by the global recession. Macquarie Group Ltd. analysts led by Sophie Spartalis said the offer is “inferior” and shareholders should reject it.
A bid of between A$23 to A$25 a share for Felix would be “more reasonable,” Spartalis said.
Felix reported profit of A$166 million in the half-year ended Dec. 31 and is yet to report full-year profit. The Australian company posted record annual coal sales of 4.8 million metric tons in the year through June.
It’s building the Moolarben coal mine in New South Wales, a A$405 million project that’s a potential “company maker,” according to Credit Suisse Group in Australia. Production is scheduled to start next March, Felix said July 30.
Source: Bloomberg
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