Australia's state government of Queensland on Monday announced it will divest its remaining stakes in coal-freight company QR National Ltd. for $1.5 billion in a bid to pool funds that could be used to pay down the state's bloating debt.
An immediate domino effect in the shares in the company occurred during Monday's early trade, where the divestment meant reducing Queensland's ownership from 34 per cent to 16 per cent, with shares surging as much as 4.5 per cent, or 15.5 cents, to $3.625.
In a separate statement, the Australian coal-freight operator said it would buy back $1 billion of the shares Queensland.
The deal likewise includes a $500 million placement to a small number of long-term, strategic investors, BusinessDay reported.
"Whilst the Government will continue to review its investment in QR National, we have no current intention to sell any of our remaining shares in the near term," Treasurer Tim Nicholls said in a statement, noting the state government would remain to be a significant shareholder in QR National.
"The LNP (Liberal National Party) opposed the former Labor government's decision to sell QR National, however we now have an obligation to Queenslanders to achieve the best possible outcome from the situation we inherited," Mr Nicholls said.
"The deal announced today does just that."
The divestment, Mr Nicholls said, correspond to a gain of $400 million to Queensland's bottom line since the initial public offer was made.
QR National operates many regional rail lines carrying goods to the ports of Geraldton, Fremantle, Kwinana, Bunbury, Albany and Esperance.
Following the divestment, Queensland's remaining ownership in QR National is now valued at $1.35, Mr Nicholls said.
Proceeds from the selective buyback are subject to shareholder approval at the QR National Annual General Meeting, expected to happen on Nov. 21.
Proceeds from the cornerstone placement are anticipated to be received on Oct. 11.
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