Rio Tinto has snubbed rival Glencore for a second time in a week as it again plumped for a revised offer from China’s Yancoal.
In a statement last night released in London and Australia, Rio said it was recommending shareholders vote for revised offer from Yancoal at meetings in London tonight and in Australia on Thursday.
In its third offer (the first was $US2.45 billion) Yancoal has lifted its offer from $US2.55 billion to $US2.69 billion – $US1.5 million more than Glencore’s second offer. Glencore’s offer was subject to approval by Rio by yesterday, June 26.
Yancoal’s total consideration of $US2.69 billion, comprising $US2.45 billion in cash payable in full on completion, as well as $US240 million via unconditional guaranteed royalty payments of which $US200 million will be received before the end of 2018. An increased break fee amount provided by Yancoal’s parent company, Yankuang, from $US100 million to $US225 million.
Rio said Yancoal’s revised offer provides “greater transaction certainty” with all the regulatory approvals received. It is likely to complete during the third quarter, “whereas any transaction with Glencore is unlikely to complete until the first half of 2018 at the earliest.”
“The revised offer from Yancoal of $2.69bn offers compelling value to our shareholders for our Australian thermal coal assets,” Rio’s chief executive Jean-Sebastien Jacques, said.
“This sale process has been in progress for a long period of time and we believe it is in the best interests of our shareholders to take the greater certainty of Yancoal’s strong proposal.”
"The Rio Tinto board considers that all parties have had significant opportunity to put forward improved terms for the acquisition of C&A since the transaction with Yancoal was announced on 24 January 2017. Therefore, it is in the best interests of shareholders to put the improved transaction with Yancoal to a vote of shareholders on the current timetable.”
Rio also noted Yancoal’s offer also includes financial assistance of $US2.1 billion from state-owned parent Yankuang Group.
Last week Glencore made a second bid of $US2.675 billion for the assets, after its first bid of $US2.55 billion was rejected last week by Rio. Glencore’s offer was subject to regulatory approvals from Australia, China, Korea and Taiwan, with China the sticking point.
Rio’s decision is not that big a surprise-China is Rio’s biggest customer and Chinalco, a state-controlled aluminium producer, is its biggest shareholder, with a 13% stake (and saved Rio after the miner nearly collapsed after the GFC under the weight of more than $US40 billion in debt taken on for the overpriced Alcan purchase).
Glencore has long wanted the Coal & Allied mines in the Upper hunter Valley because they offer enormous economies of scale with Glencore’s own mines nearby (one of which was owned by a Coal and Allied associate years ago.
