Headwind for Rio Tinto Oz coal deal

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