Less than a fortnight after blocking a foreign takeover for grains group GrainCorp, Treasurer Joe Hockey has kept the business community off-balance by giving a Chinese government entity the green light to take full control of a swag of local coal assets.
Contrary to an earlier decision that forced Yanzhou Coal Mining Co to maintain a local sharemarket listing of its Australian assets after paying more than $5 billion for control of a string of coalmines in Queensland and NSW, it has now been cleared to force out minority shareholders, if it wants to do so.
"Changing the conditions of the original acquisition oppresses the position of minority shareholders," one adviser close to the situation said on Wednesday, "especially since Yanzhou has given the government 'commitments', which have yet to be made public."
Yanzhou paid $3.3 billion for Felix Resources in 2009 and followed that up last year with the $2.2 billion acquisition of Gloucester Coal.
The government approved the purchase of Felix on the condition Yanzhou list its Australian operations on the ASX by the end of 2012, holding no more than an initial 70 per cent of the Felix assets, to be reduced by the end of 2014 to no more than 50 per cent.
Additionally, Yanzhou was to reduce from 100 per cent its ownership of two other coal assets, Premier Coal and Syntech.
Yanzhou holds 78 per cent of the ASX-listed Yancoal Australia, with Singapore-listed trader Noble Resources holding 13.16 per cent. Yancoal listed on the ASX in 2012, which gave Yanzhou a vehicle to part-fund any expansion. However, the downturn in the coal sector has forced Yancoal to slash costs while casting doubt that any expansion program will be pursued.
Yanzhou made public a proposal to buy out minority shareholders in July, offering 0.91 of its shares for every share held in Yancoal.
But that proposal has stalled, while Wednesday's decision by Canberra has put a cloud over the position of minority shareholders in Yancoal, since the Treasurer's decision appears to give the Chinese-owned entity the upper hand in dealing with minority shareholders.
Independent directors of Yancoal said on Wednesday they were "engaging" with Yanzhou, "including in relation to the commitments provided by Yanzhou to the Treasurer and how this impacts upon Yanzhou's privatisation proposal".
Earlier in the year, Yanzhou sought government approval to maintain unchanged its present 78 per cent stake in Yancoal Australia, which the government has now approved.
"The government has no in-principle objection to 100 per cent foreign ownership of Australian companies where it is not contrary to the national interest and is open to any such proposals from Yanzhou in the future," Mr Hockey said.
This is in contrast to the recent decision to block US company Archer Daniels Midland from buying GrainCorp, which prompted intense criticism from the business community that the government had caved in to pressure from its Coalition partner, the National Party.
In opening the door to full privatisation of Yancoal, the federal government noted the change in the coal sector's fortunes as prices have fallen as the strong Australian dollar has squeezed returns.
"The conditions imposed in 2009 also provided Yanzhou with the ability to seek the Treasurer's approval to vary these conditions if they were impacted by changes in economic conditions or other factors," Mr Hockey said.
"Since those conditions were imposed, significant challenges have emerged for the Australian coal industry, including slowing demand, declining coal prices and a number of mine closures."