26.06.2017

Glencore: Superior proposal for Rio Tinto's coal mines

400Glencore has sharply raised the stakes in the bidding war for Rio Tinto’s Hunter Valley coal mines by delivering a fresh $2.675 billion offer for the assets. In an announcement in London, Glencore said it would increase its offer by $125 million in an attempt to trump Yancoal’s $2.45 billion bid, which had been selected by Rio Tinto.

However, in a major sweetener Glencore said it would expedite payment to Rio Tinto with a cash settlement once the deal is completed.

Its previous offer, along with Yancoal’s bid, provided payment over five years. "We believe the Glencore offer satisfies the criteria for a 'superior proposal': it delivers substantially greater value to Rio Tinto shareholders and low deal completion risk," Glencore said in a statement.

The deal is subject to regulatory approvals, and Glencore has demonstrated its confidence in clearing them by putting down a $225 million deposit, which it will forfeit if the transaction does not go ahead. Swiss group, led by billionaire Ivan Glasenberg, has coal mines adjacent to Rio’s operations in the Hunter Valley, and believes it can make substantial savings by joining the two businesses together.  

Rio's mines in the Hunter Valley north of Sydney are attractive to both Glencore and China's Yancoal because they are likely to be profitable for the remaining life of the pits, which is expected to be around 20 years.

The Rio mines already have all the necessary infrastructure, being connected by rail to the major export harbour of Newcastle, the world's largest coal export port.

Rio had convened two extraordinary general meetings next week in London and Sydney to approve the sale to Yancoal. It needs shareholder approval because the deal counts as a related party transaction, as both Rio and Yancoal are part-owned by companies backed by the Chinese state.

Rio has until the end of Monday to respond to the offer.

Separately, Glencore announced that Mr Glasenberg had been appointed to the board of Rosneft. Glencore and the Qatari Investment Authority took an 19.5pc stake in the Russian oil giant last year. 


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