Glencore offers $2.5 bn for Rio Tinto coal mines
SYDNEY: Miner-trader Glencore on Friday said it had offered $2.55 billion cash for coal mines owned by Rio Tinto in Hunter Valley, Australia, outbidding a previous offer from Chinese-owned Yancoal.
The large-scale, long-life assets are next to mines already owned by Glencore, which has predicted continued demand for coal, especially in Asia, despite environmental opposition to the most polluting form of fossil fuel.
In January, Rio said it was selling its interest in Coal & Allied Industries Limited (C&A) to Yancoal Australia Limited for $2.45 billion.
The terms allowed Rio to engage in negotiations with another party if it made a better offer.
Glencore’s proposal is $100 million higher and fully funded, but Rio Tinto has to give Yancoal the chance to make a counter offer, opening the way for a bidding war.
Rio said in a statement it had received the offer and would respond “in due course”. Analysts say Glencore has long been interested in the assets and predicted its offer could succeed.
“We cannot see Rio refusing unless it feels it will hurt its cosy China relationships,” Hunter Hillcoat of Investec said.
Glencore’s bid, made up of $2.05 billion upfront and $0.5 billion in instalments over five years, will automatically expire on June 26 if a binding sales agreement has not been reached.
If the deal is completed, Glencore is also offering to buy minority stakes in Hunter Valley operations from Mitsubishi for $920 million cash.
Glencore also said it will stick to a pledge to limit its net debt to EBITDA (earnings before interest, tax, depreciation and amortisation) to a maximum of 2:1.