Hedge fund Senrigan Capital Management has asked Australian regulators to intervene in Yancoal Australia's efforts to fund its $2.69 billion purchase of the Coal & Allied division of Rio Tinto, saying it is unfair to minority shareholders, Reuters reported on August 9.
Senrigan is seeking an order from Australia's Takeovers Panel that a proposed renounceable entitlement offer to raise up $2.35 billion be prevented from proceeding in its current form without shareholder approval.
A second minority shareholder, commodities trader Noble Group is also considering taking the deal to the Takeovers Panel, a source close to Noble said recently.
The Takeovers Panel said in a statement it had made no decision whether to conduct proceedings. The entitlement offer is due to run from August 10 to August 25.
The purchase of the Rio assets would give Yancoal, which is 78% owned by Chinese coal giant Yanzhou Coal Mining Ltd, majority interests in three of the 10 largest low-cost thermal coal mining operations in Australia.
The panel said Senrigan had submitted that the 23.6 for 1 renounceable entitlement offer priced at $0.10 per share, a deep discount to Yancoal's share price before the announcement, was "unnecessarily highly dilutive and value shifting."
The offer was also underwritten by two groups that were associates of Yanzhou, which could take its voting power in Yancoal from 78% to 89.15%, Senrigan said.
The offer does not allow existing minority shareholders a "reasonable and equal opportunity to participate and is prejudicial to the ongoing ownership interests of existing minority shareholders," the fund said.
Senrigan and Noble argued successfully before the Takeovers Panel in 2014 that a rights offer by Yancoal was part of a strategy to enable Yanzhou to convert notes into shares to allow for the compulsory acquisition of minority shareholdings without a shareholder vote.
Separately, Glencore has agreed to buy a 49% interest in a key part of Coal & Allied, comprising a 16.6% stake directly from Yancoal and 32.4% from Mitsubishi Development Corp contingent on the deal going through.
(Writing by Becky Du Editing by Harry Huo)
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