The Rio Tinto board has recommended shareholders to support the asset sale to Yancoal.
Rio stated that shareholders should vote for the $2.45bn proposal from Yancoal for the Coal & Allied unit in New South Wales, although the price is lower than Glencore’s $2.55bn offer, given the chances of approval from regulatory authorities and certainty in funding.
Earlier this month, Glencore offered $2.55bn for Coal & Allied, which is more than Yancoal’s bid of $2.45bn. However, Yancoal's offer was favoured by the Rio Tinto board after the former agreed to bring forward the final $500m purchase price instalments. In addition, Yancoal offered assurances about its ability to fund the purchase.
Rio Tinto chief executive J-S Jacques said: "We believe Yancoal’s offer to purchase our thermal coal assets for $2.45bn offers the best value and greater transaction certainty for shareholders.
"Yancoal’s revised offer is the most attractive because it removes the deferred payment structure, can meet the timeline we have set for the transaction, and has given us certainty regarding the outstanding regulatory approvals required.”
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Glencore intended to acquire Coal & Allied assets as it will provide synergies with its existing coal mines in New South Wales, reported The Australian.
The transaction is expected to be completed in the third quarter of this year, subject to approval from the shareholders of Rio Tinto.
Coal & Allied has significant operations in Australia's Hunter Valley.
Image: Hunter Valley operations. Photo: courtesy of Rio Tinto.