Yanzhou Bids for Felix Resources(Answer)

1. When should stockholders doubt their own company’s support of a friendly acquisition?

 The management will not be laid off after the acquisition owing to the government approval conditions.  The four big share holders may have different calculations → The true value of a share may be 20(USD), But…. - They could have got other opportunities to invest, and PV of that will be more than 20(AUD)/Fellix share , when many small shareholders can’t find better chance. - Yanzhou and they could make a backdoor deal.

2. What is your assessment of the stipulations placed on the acqusition by the government?

The approval conditions by the government

 Felix’s employees and management would be 100% retained  Yancoal Australia, a mine operating company, incoperated and headquartered in Australia would be created.

 Yancoal would be managed primarily by Australian managers and sales staff

 The coal would be marketed on an arm’s-length basis consistent with international benchmarks and practices.

 The fact that Yanzhou accept these stipulations means - Yanzhou’s main purpose of this acquisition is secure coal for their consumption more than creating new values through control premium. - So, we can not expect value-up by this acqusition.

3. Which of the various valuation techniques do you find the most and least useful?

 DCF - widly used and estimate a real value most closely because it is calculated from future cashflow - However, it is very difficult to forecast future cashflow (price tend to fluctuiate, production depend on reserves..)

 Reserves - More convinient and practical : not from uncertain cash flow - However, it can overlook different conditions of each mines. (Qualities of coal, Geographical condtion-transfortation , Other management abilities…….)

3. Which of the various valuation techniques do you find the most and least useful?

 Comparables - Comparatively simple but trustworthy - It wolud be more and more accrurate if you find...