Glencore makes US$3.5B coal play as CEO seeks growth
After selling assets and reducing debt, management again on expansion track
Glencore Plc is looking to buy about US$3.5 billion in coal assets just weeks after approaching grain trader Bunge Ltd. as CEO Ivan Glasenberg steps up expansion efforts following a painful commodities downturn.
The Baar, Switzerland-based producer and trader submitted a proposal to buy Australia’s Coal & Allied Industries Ltd. from Rio Tinto Group for US$2.55 billion, it said in a statement Friday.
If successful, the company also agreed to buy Mitsubishi Corp.’s stakes in two Australian coal ventures for US$920 million.
While Glencore was publicly rebuffed by the U.S. grain-trading giant, billionaire Glasenberg signalled he wouldn’t waver in his ambition to expand in agriculture. Now he’s turning to coal, showing how far the company has come since a period of asset sales and cutbacks to bring down debt. If the C&A deal goes through, the company would sell at least US$1.5 billion in assets, which may include bringing in partners for the C&A mines.
Glencore’s American depository receipts fell 0.3 per cent in New York Friday afternoon. The stock has more than doubled in value in the past year.
Glencore’s bid for C&A follows a potential sale of the company to Yancoal Australia Ltd., terms of which left the door open to a superior proposal.
The C&A mines are adjacent to existing Glencore mines in Australia’s Hunter Valley, and would take the company’s production capacity in the area to 81 million metric tons a year. In 2014, Glencore and Rio considered merging their coal businesses. At the time, Credit Suisse estimated it would save the two companies more than US$500 million.
“There is no certainty that any transaction will be concluded,” it said, adding that the deal would be funded from existing cash and committed facilities.
“Glencore will only be bound once a binding share purchase agreement is concluded with Rio Tinto.”
The commodity trader has already returned to deal making. In December, it teamed up with shareholder Qatar Investment Authority to buy almost 20 per cent of Russian oil producer Rosneft PJSC. Glencore only committed 300 million euros (US$334 million) into the US$11 billion deal, with the rest coming from financing.
Intesa Sanpaolo SpA began syndication of a 5.2 billion-euro loan supporting the transaction last week, according to people familiar with the matter. Glencore also agreed to a US$960 million Congo mining deal in February.