So much for all the talk from the 5th largest shareholder in Turquoise Hill Resources telling credulous media and analysts that it will threaten the deal by voting against the latest offer from Rio Tinto.
Independent directors in Turquoise Hill have voted to approve the latest $C43 a share offer from Rio, putting the deal on track to be completed later this year after a shareholders meeting is held.
However US group Sailingstone Capital Partners, the fifth-biggest investor in Turquoise Hill, has claimed it is ready ‘to put the brakes’ on Rio’s intended $US3.3 billion takeover of the Canadian miner, claiming it doesn’t adequately compensate minority shareholders.
Sailingstone owns 2.2% of Turquoise Hill but that doesn’t matter now the bid is headed to a shareholding meeting where Rio can vote its 51% stake in a process that needs 66.67% approval from 50% of the minority shareholders who hold the other 49% of Turquoise Hill’s shares.
Sailingstone’s stake has a bigger value in the second part of the vote where Rio can’t participate, but it will still be too little with other shareholders approving the offer.
Sailingstone claims the $C43 a share offer is $C13 a share under the price it would accept.
Rio’s offer already has the unanimous support of Turquoise Hill’s special committee of independent directors, the two companies said on Tuesday.
Senior officers of Turquoise Hill have entered into voting support agreements with Rio with respect to all of the Turquoise Hill shares they own or control.
If approved, the move would give the global miner a 66% stake in the giant Oyu Tolgoi mine in Mongolia, one of the world’s largest known copper and gold deposits. The remaining 34% is owned by the Mongolian government.
Rio has agreed to provide Turquoise Hill with secured short-term liquidity during the Transaction period of up to $US1.1 billion (subject to certain pre-conditions), which would need to be repaid from an equity raising from shareholders in the first half of 2023 if the Transaction is not approved by shareholders.
That is a serious barrier to the ‘no’ campaign as the likes of Sailingstone would have to find tens of millions of dollars to maintain its holding in Turquoise Hill and its stake in the Mongolian mine.
Rio pointed out in Tuesday’s statement that Turquoise Hill has estimated that it requires $US3.6 billion of additional funding in total to complete the project. It aims to address this through a funding plan including renegotiating debt repayment dates, which requires the unanimous consent of participating lenders.
“The success of this debt renegotiation and certain other funding plans is uncertain and, if unsuccessful, could require further equity contributions from shareholders. The Transaction delivers certainty for the financing needs of Oyu Tolgoi and alleviates any further funding risks for shareholders,” Rio said.
Rio CEO Jakob Stausholm said: his company’s offer “guarantees Turquoise Hill’s minority shareholders outstanding value through a significant all-cash premium for their shares.”
“After extensive negotiations, the terms of the transaction are final and there will be no further price increase. We look forward to working with the Turquoise Hill Board of Directors to ensure Turquoise Hill shareholders are able to realise the significant and immediate value of the Transaction.”
Rio shares eased 1% to $90.80 on Tuesday.
