Rio Tinto picks Yancoal offer over that of Glencore in C&A sale

JOHANNESBURG (miningweekly.com) – Diversified miner Rio Tinto on Tuesday urged its shareholders to vote in favour of the sale of its wholly-owned subsidiary Coal & Allied Industries (C&A) to Yancoal Australia, as opposed to electing the counter proposal from Glencore.

In January, Rio Tinto reached a binding agreement for the sale of Australian subsidiary C&A to Yancoal for an initial $1.95-billion cash payment and $500-million in aggregate deferred cash payments, payable over five years.

Earlier this month, Glencore offered to acquire the C&A assets for $2.55-billion, comprising an initial $2.05-billion in cash and $500-million in deferred cash payments payable as annual instalments of $100-million over five years. The offer also included a coal price-linked royalty.

However, having considered factors in both proposals, Rio Tinto was leaning towards the Yancoal proposal, owing to its agreement to accelerate all deferred payments and make a single payment of $2.45-billion, plus a coal price-linked royalty, to buy the C&A assets.

Additional information and confirmations regarding Yancoal's funding plans has further cemented Rio Tinto’s decision, while confirmation that Yancoal will waive all the regulatory approvals that are conditions precedent to its ability to close has also contributed.

“The expectation that there will be a much faster completion timeframe under Yancoal's proposal is in the best interests of Rio Tinto shareholders, as it reduced uncertainty,” Rio Tinto added.