Glencore ups bidding war for Rio Tinto's coal mines to £2.1bn
GLENCORE has upped the stakes in the bidding war for Rio Tinto’s coal mines in Australia.
Glencore has upped the stakes in the bidding war for Rio Tinto’s coal mines
FTSE 100 mining and commodities trading heavyweight Glencore has increased its cash offer for Rio’s interest in Coal & Allied by $125million to $2.675billion (£2.1billion).
Rio had already snubbed Glencore by agreeing to sell the division to Chinesebacked Yancoal for a lower price of $2.45billion, arguing that it could be completed more quickly because it had regulatory approvals.
But Glencore said its latest offer, which includes a coal-linked royalty, is fully funded and subject only to a limited number of regulatory approvals.
It expressed its confidence in securing the necessary approvals by offering a $225million deposit to be forfeited if the deal is blocked by regulators.
It already has clearance from Japan, which is the biggest customer of coal from Hunter valley, where Glencore has coal mines adjacent to Rio’s operations.
Glencore said: “We believe our offer satisfies the criteria for a ‘superior proposal’. It delivers substantially greater value to Rio Tinto shareholders and low deal completion risk.”
Rio had already snubbed Glencore by agreeing to sell the division to Chinesebacked Yancoal
We believe our offer satisfies the criteria for a ‘superior proposal’
It said its offer would automatically lapse if Rio did not declare it to be the superior offer on June 26 and subsequently if a binding sales agreement is not secured on July 5.
Rio said it would give Glencore’s new proposal “appropriate consideration” and provide a further update ahead of its general meeting on June 27.
The meeting may be adjourned if it needs extra time to consider it.
Glencore reports a significant fall in commodity production
Broker Macquarie said: “We believe that Glencore has adequately addressed Rio’s concerns around the perceived shortcomings of its original bid which places the ball firmly back in Yancoal’s court.”
Jefferies analyst Christopher LaFemina said: “These are excellent assets, but Glencore would be paying a high price, and the use of cash to fund these purchases would limit the company’s ability to return cash to shareholders in 2018.
“Glencore is clearly once again in growth mode. However, this deal is better for Rio than it would be for Glencore, based on our analysis.”