Rio Tinto snubs Glencore’s offer

Rio Tinto has backed an improved offer by Yanzhou Coal Mining for its Australian coal mines, snubbing a last-minute bid from Glencore.

Rio Tinto has backed an improved offer by Yanzhou Coal Mining for its Australian coal mines, snubbing a last-minute bid from Glencore.

Shareholders should vote for the $2.45bn proposal from Yancoal for the Coal & Allied unit in New South Wales, according to a statement from Rio on Tuesday.

Even though the price was lower than Glencore’s $2.55bn bid, Rio said the likelihood of regulatory approval and funding certainty made China’s Yancoal a better choice.

“It is not surprising that Rio Tinto feels that the Yancoal offer will likely close quicker than Glencore’s,” analysts at BMO Capital Markets wrote in a research report.

“Missing out may be a little disappointing for Glencore, which will remain in the hunt for alternative transactions.”

Glencore would review Rio’s statement and might respond later, a spokesman said.

This is the first major sale of an operating asset under Rio’s new CEO, Jean-Sebastien Jacques. Rio shareholders will vote on the deal in June and the company expects the sale to be completed in the third quarter.

THE LIKELIHOOD OF REGULATORY APPROVAL AND FUNDING CERTAINTY MADE YANCOAL A BETTER CHOICE

On June 9, Glencore made a surprise bid for Rio’s assets, which are near its own mines in Hunter Valley, the region north of Sydney that supplies the world’s biggest coal export harbour at Newcastle.

Yancoal responded by strengthening its offer, choosing a single $2.45bn payment instead of paying a portion in annual instalments.

“Our offer provides certainty of execution, having already achieved all key international regulatory approvals,” Yancoal said on Tuesday. “In comparison, the Glencore bid remains subject to material regulatory risk.”

Yancoal had received approval from Chinese regulators. Yankuang Group, its biggest shareholder, provided financial assurances for the deal, the company said.