Rio Tinto has shrugged off a bid from Glencore for its coal mines in the Hunter Region, saying the original partner in the deal – Yancoal – remains the preferred bidder at this stage.
The mining giant’s board on Tuesday reconfirmed its recommendation that shareholders vote in favour of selling its wholly-owned Coal & Allied business to Yancoal, despite Glencore offering $100 million more for the mines last week.
Yancoal has since made a revised offer which, albeit still lower in value than Glencore’s, is preferred by Rio.
Yancoal’s bid, announced earlier this year, is considered superior by the board, because Yancoal has agreed to accelerate all deferred payments and make a single payment of $2.45 billion to purchase the business, along with a coal price-linked royalty.
The board said it had “engaged in active discussion with both parties,” and had assessed a number of factors, including the potential of regulatory approval difficulties.
There is some thought that the ACCC may challenge Glencore’s bid, due to the commodity giant’s major existing presence in the Hunter.
Yancoal, meanwhile, has received or will waive all regulatory approvals, according to Rio. There is, therefore, an “expectation that there will be a much faster completion timeframe under Yancoal’s proposal,” the miner said.
“Yancoal’s revised offer is the most attractive because it removes the deferred payment structure, can meet the timeline we have set for the transaction, and has given us certainty regarding the outstanding regulatory approvals required,” Rio boss J-S Jacques said.
“The sale of Coal & Allied will create outstanding value for shareholders and is consistent with our strategy of simplifying our portfolio to ensure the most effective use of our capital.”