Rio Tinto Picks Yancoal as Preferred Buyer of Thermal Coal Assets

The battle over Rio Tinto' (ASX, LON:RIO) coal assets in Australia's Hunter Valley seems to have come to an end as the miner has picked an improved offer by Yancoal Australia (ASX:YAL), a subsidiary of China's Yanzhou Coal Mining, over Glencore's (LON:GLEN) bid.

But Glencore, which like Yancoal also operates numerous coal mines in Australia, offered Dollars 100 million more for the assets - in New South Wales state - earlier this month.

Rio said it was favouring Yancoal's offer in the light of additional information, including confirmation of Yancoal's funding plans - although it did not publish details - confirmation of regulatory approvals and improved terms.

Despite that, Rio chief executive Jean-Sébastien Jacques said in a statement last night, that the Yancoal Australia offere was the "best value" and greater "transaction certainty" for its shareholders.

A bidding war broke out over the coal mines earlier this month when Glencore revealed it had tabled a $2.55bn (£2bn) offer for the assets, $100m more than the initial bid by Yancoal, which was announced in January.

Under the original proposal, Yancoal was to pay an initial sum of Dollars 1.95 billion and the rest as deferred payments, but would now make a single payment of USD 2.45 billion, Rio said. The Financial Times says "This raises the possibility that Yancoal could scrap its offer if the coal market suddenly tanks later this year". "Missing out may be a little disappointing for Glencore, which will remain in the hunt for alternative transactions".

But it will now make a single payment of US$2.45 billion, Rio said.

Rio Tinto shareholder meetings have been convened for June 27 in London and June 29 in Sydney to vote on the Yancoal sale, which is expected to be completed in the third quarter.

Yancoal received outbound investment approval from China's National Development and Reform Commission and the Ministry of Commerce, as well as merger clearance from the nation's Anti-Monopoly Bureau.

  • Zachary Reyes