Glencore Raises Offer for Rio Tinto's Australian Coal Assets -- 2nd Update
June 23 2017 - 12:50PM
Dow Jones News
By Tapan Panchal
LONDON -- Glencore PLC said Friday it has submitted a sweetened
all-cash offer of $2.68 billion for Rio Tinto PLC's Australian coal
assets, days after its previous attempt to scotch an acquisition by
a Chinese suitor was rejected.
The Anglo-Swiss mining-and-commodities trading giant said its
bid for Coal & Allied Industries Ltd., which includes a coal
price-linked royalty, is fully funded and is at least $225 million
greater than an offer made by Yancoal Australia Ltd., a subsidiary
of China's Yanzhou Coal Mining Co.
Anglo-Australian mining company Rio Tinto on Tuesday rebuffed a
$2.5 billion offer Glencore made earlier this month, and
recommended that shareholders approve Yancoal's $2.45 billion bid,
in part because it expects to complete the deal faster than one
with Glencore.
Glencore also offered Rio Tinto a $225 million deposit to be
forfeited if the transaction were unable to obtain regulatory
approval.
Rio Tinto said Friday its board will consider Glencore's
proposal and provide an update ahead of its general meeting on
Tuesday.
Friday's raised offer from Glencore further demonstrates the
renewed appetite for deal-making by Chief Executive Ivan Glasenberg
almost two years after the Switzerland-based commodity giant
experienced a downward spiral in share price.
Since the company's stock recovered, Mr. Glasenberg has
engineered the purchase of a stake in Russian state oil company PAO
Rosneft, taken full control of a Congolese mine and made an offer
to take over agricultural trader Bunge Ltd.
Mr. Glasenberg has long coveted Rio Tinto's coal assets because
they sit near some of Glencore's Australian coal operations,
offering opportunities for cost savings were they to merge.
"The probability of Glencore gaining these assets has increased
in our view," RBC Capital Markets said in a note on Friday.
A Glencore takeover of Rio's coal assets would hand more control
to a company that is already one of the biggest coal traders in the
world. Rio has touted Yancoal's approval from regulators in China,
a voracious consumer of coal.
In its news release announcing its higher offer, Glencore
suggested that Rio's concerns about Chinese regulatory approvals --
which Yancoal already has -- are overblown. Chinese antitrust
regulators have flexed their muscles on mining deals in recent
years but Glencore said it is "reasonably confident" the Rio assets
up for sale represent less than 1% of China's seaborne imports.
"Glencore therefore believes that any concerns regarding Chinese
antitrust approval risk are not justifiable," the company said.
Rio Tinto is trying to shed much of its coal operations,
especially thermal coal, the type burned to make electricity.
The price of thermal coal shot up in 2016 as demand from China
heated up. The market has cooled this year, and analysts expect
prices to remain subdued as countries switch to cleaner-burning
fuels.
Glencore, the world's biggest trader of thermal coal, expects
demand for the fossil fuel to remain solid, since it is one of the
cheapest fuels for electricity generation.
Shares of Glencore were down 0.4% in Friday afternoon trading,
while Rio shares were up 1.2%.
Write to Tapan Panchal at Tapan.Panchal@wsj.com
(END) Dow Jones Newswires
June 23, 2017 13:35 ET (17:35 GMT)
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