Singapore's Noble Group presses China's Yanzhou to improve offer for Australian unit

MELBOURNE (Reuters) - China's Yanzhou Coal Mining Co is under pressure to raise its US$191 million (S$236 million) offer to take its Australian Yancoal unit private from Singapore's Noble Group, a key Yancoal shareholder, people familiar with the process said.

Yanzhou proposed in July to buy out the 22 per cent of Yancoal Australia that it does not already own at A$0.91 (S$1.08) a share, but it has yet to make a formal offer.

Hong Kong-based commodities trader Noble, which owns more than half the minority shares and could block the deal from going ahead, has put a proposal to Yanzhou for a higher offer, two people familiar with the process said.

"Noble understands what Yanzhou's objectives are and is empathetic, but they want proper value for their stock," one of the people said.

Yancoal's independent directors said on Monday they were not involved in any discussions between Noble and Yanzhou and were unaware of the outcome of any talks.

Yanzhou, China's third biggest coal firm by market value, was not immediately available for comment. Noble declined to comment.

The deal would give Yanzhou more control over a key coal asset at a time when its market value has slumped in line with falling coal prices. But it is expected face stiff opposition from local regulators as it appears to run counter to previous requirements that Yancoal be run as an Australian company.

The government would have to waive key conditions imposed on Yanzhou when it took over Felix Resources in 2009 for A$3.5 billion and when Yancoal merged with Gloucester Coal last year.

Sources declined to comment on the status of Yanzhou's talks with the Foreign Investment Review Board (FIRB), which must make a recommendation to Australia's new treasurer, Joe Hockey.

FIRB conditions required Yanzhou to list its Australian assets, which it did last year through the Gloucester merger, to reduce its 78 per cent stake in Yancoal Australia to less than 70 per cent and to cut its economic stake in the underlying Felix assets to no more than 50 per cent by the end of 2013.

Yancoal's shares rose 1.4 per cent on Monday to A$0.72, trading well below the value of the offer as uncertainty weighs on whether a deal will go ahead.