Rio Tinto has rejected a revised offer made by Swiss-based mining company Glencore to buy its wholly-owned subsidiary Coal & Allied Industries for up to $2.67bn.
On 23 June 2017, Glencore raised its offer to purchase Rio Tinto’s Australian coal unit after the latter selected Yancoal as a preferred buyer of its coal assets.
Intensifying the bidding war, Yancoal also increased the purchase price for Rio Tinto’s coal assets to $2.69bn from about $2.45bn.
Citing improved offer from Yancoal, Rio Tinto has once again confirmed Chinese government-controlled company as the preferred bidder of its thermal assets in Australia.
Rio Tinto said that it has considered latest offers from both the companies and is recommending Yancoal’s raised offer to its shareholders taking into account greater transaction certainty and higher net present value.
Yancoal revised offer includes $2.45bn in cash payable in full on completion, as well as $240m via unconditional guaranteed royalty payments.
The transaction amount also includes an increased break fee amount provided by Yancoal’s parent company Yankuang from $100m to $225m.
Rio Tinto chief executive J-S Jacques said: “The revised offer from Yancoal of $2.69bn offers compelling value to our shareholders for our Australian thermal coal assets.
“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.”
Rio Tinto needs to secure the approval of its shareholders to sell its Australian coal assets to Yancoal.
Coal & Allied Industries unit owns and operates multiple, multi-seam open cut mines in the Hunter Valley region of New South Wales as well as export infrastructure.
It owns 67.6% stake in the Hunter Valley Operations mining complex, 80% interest in the Mount Thorley mine, 55.6% in the Warkworth mine and other undeveloped coal assets, including various landholdings.
The firm also has 36.5% stake in Port Waratah Coal Services, a coal export terminal located at the Port of Newcastle.
Image: Yancoal also increased the purchase price for Rio Tinto’s coal assets to $2.69bn from about $2.45bn. Photo courtesy of dan/FreeDigitalPhotos.net.