SYDNEY/LONDON (Reuters) - Glencore (OTC:GLNCY) is likely to reject a $3.60 a share offer by coal producer Yancoal Australia Ltd's Chinese parent to buy its minority stake in the miner as too low, two sources with knowledge of the matter said.
Yankuang Energy Group made an offer last week to acquire the 37.7% stake of Yancoal it does not already own at a discount to the current market price, valuing it at $1.8 billion.
The offer is "unacceptable" for Glencore, which holds a 6.4% stake in Yancoal, because it "significantly undervalues" the company's stock, said the sources who did not want to be identified as the discussions were private.
Demand for thermal coal, the most polluting fossil fuel burned to generate electricity, reached record highs on power shortages in China and a European gas squeeze further exacerbated by Russia's invasion of Ukraine, which reduced global supplies.
A nod from the London-listed miner and trader is critical for Yankuang to get close to the 90% ownership threshold which, according to Australian rules, would allow it to acquire all the small number of shares owned by retail and institutional investors and take Yancoal private.
Glencore would be willing to sell its stake at the right price, one of the sources said, without specifying what that price would be.
Yancoal did not respond to a request for comment and Yankuang could not be immediately reached for a comment. Glencore did not comment on the matter.
Yancoal owns coal mines in New South Wales, Queensland and Western Australia, and counts Glencore and China Cinda Asset Management among its top minority shareholders.
Yankuang holds 62.2% of Yancoal, while China Cinda has 15.9% and Shandong Lucion Investments Holdings holds 4.9%, according to Refinitiv data.
Analysts and brokers in Australia criticised Yankuang's offer as "low ball", as it was at about a 15% discount to Yancoal's current stock price of A$5.50 ($3.95).
"We would be very surprised if the independent directors of Yancoal accepted that offer from the parent given it's a low indicative bid and transfers value from a low risk ASX (Australian Securities Exchange) listing where all Yancoal's assets are to a far riskier convertible in mainland China," Angus Aitken at stockbroker Aitken Mount said in a note to clients.
($1 = 1.3920 Australian dollars) - Investing.com