Head­wind for Rio Tinto Oz coal deal

The Star Early Edition - - COMPANIES - Perry Wil­liams

GLEN­CORE’S quest for a piece of Rio Tinto Group’s Aus­tralian coal busi­ness may not be over yet.

The Swiss com­mod­ity gi­ant’s planned part­ner to man­age the as­sets, Yan­coal Aus­tralia, faces a chal­lenge from a mi­nor­ity share­holder con­cerned that its stake will be di­luted by the $2.5 bil­lion (R33.14bn) eq­uity rais­ing needed to fund the deal.

Hong Kong-based hedge fund Sen­ri­gan Cap­i­tal Group said the pro­posed rais­ing by Yan­coal, which is ma­jor­ity owned by China’s Yanzhou Coal Min­ing, is prej­u­di­cial to mi­nor­ity share­hold­ers and would strengthen Yanzhou’s vot­ing power, ac­cord­ing to a state­ment from Aus­tralia’s Takeovers Panel.

The panel hasn’t de­cided whether to pur­sue pro­ceed­ings, it said.

The chal­lenge may be another set­back for Glen­core’s am­bi­tions to con­trol Rio’s as­sets in Aus­tralia’s Hunter Val­ley, which are sit­u­ated near its own op­er­a­tions.

Glen­core failed twice to out­bid Yan­coal, be­fore the two com­pa­nies an­nounced a sur­prise $1.1bn deal last month that would split the spoils be­tween them.

The move by Sen­ri­gan, which spoke out against the fi­nanc­ing in June as well, has the po­ten­tial to de­lay or even de­rail the deal, ac­cord­ing to David Len­nox, an an­a­lyst at Fat Prophets in Syd­ney.

“It brings a level of un­cer­tainty to the ta­ble, which I’m sure Rio would rather not have to deal with,” said Len­nox.

“Glen­core will be sit­ting back and watch­ing this closely. They might be get­ting their pen­cil out and do­ing the num­bers just in case this Yan­coal fi­nanc­ing falls over. They could come back and even strike a dif­fer­ent deal.” – Bloomberg

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