Felix takeover given conditional approval

Approval of the $3.5 billion takeover of Felix Resources by China's Yanzhou Coal has come with a number of conditions.

The Federal Government’s approval of the $3.5 billion takeover of Felix Resources by China’s Yanzhou Coal has come with a number of conditions.

Assistant Treasurer Nick Sherry announced late last Friday the approval of Yanzhou’s 100% takeover of the Brisbane-based coal producer, which represents the biggest ever Chinese state investment in Australia’s resource sector.

The Federal Government has ensured that Yanzhou’s total control of Felix will not be permanent, however, after adding the condition that the state-owned company float at least 30% of Felix and other Australian assets on the Australian Securities Exchange by the end of 2012.

In addition, Yanzhou’s economic interest in the underlying mining assets after the listing must be less than 50%.

Also conditional to the deal’s approval is Yanzhou’s Australian company, Yancoal, having its headquarters in Australia and having a mostly Australian management and sales team.

The deal may have increased uncertainty about the Federal Government’s attitude to Chinese state-owned investment.

Approval of the takeover is in stark contrast to recent comments from executive chairman of the Foreign Investment Review Board (FIRB), Patrick Colmer, that the Government would prefer state-owned companies to limit their stakes in undeveloped projects to below 50% and to below 15% in major producers.

It also comes after comments last week by BHP chairman Don Argus calling for more steps to be taken to protect local resource investment.

A spokesman for Sherry’s office has said that the deal’s structure should not be viewed as a specific framework for other foreign investment.

“Foreign investment decisions are made in the national interest and on a case-by-case basis,” he told The Australian.

“The Assistant Treasurer’s decision in relation to Yanzhou’s acquisition of Felix … should only be read as a decision on the case at hand.”

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