Yahoo Finance Glencore ramps up bidding war for Rio Tinto’s coal mines
Glencore has stepped up the bidding war for Rio Tinto’s coal mines in Australia by returning with a higher offer.
The Switzerland-based mining group said it would offer $2.68bn (£2.1bn) in cash, payable in one lump sum, for Rio’s Coal & Allied business in New South Wales. This represents an advance on the $2.55bn it offered earlier this month and is considerably more than the $2.45bn offered by Yancoal, the Chinese-backed miner that is Rio’s preferred buyer.
Glencore, 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.
Earlier this week Rio said it would stick with Yancoal’s offer, first made in January, because it had already gained regulatory approvals for the deal.
However Glencore said today it was confident of securing the same approvals and would be willing to forfeit a $225m deposit if the deal did not go through. The company believes it is in a strong position because it already has clearance from Japan, which is by far and away the biggest customer of Hunter Valley coal.
As a further sweetener, it has offered to let Rio keep the cashflows from the business until the deal completes.
“We believe the Glencore offer satisfies the criteria for a ‘superior proposal’,” the company said.
Glencore’s determination to buy Coal & Allied stems from its confidence that Japan and other Asian countries will continue to need large supplies of coal even as the world looks for greener sources of energy.
Mr Glasenberg’s move will also pile pressure on Rio’s boss, Jean-Sébastien Jacques, to accept a deal that is fully funded. By contrast, doubts persist as to whether debt-laden Yancoal can secure finance for the deal.
Rio had already 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.
Glencore, which had to perform an emergency fundraising in 2015 to slash its mounting debt, has promised not to overstretch itself with future deals, and has said it would look to sell off around $1.5bn in assets to offset the cost of Coal & Allied.
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.
