Rio Tinto Rebuffs Glencore Again, Prefers China-Backed Offer for Austalian Coal Business

By Tapan Panchal and Razak Musah Baba Features Dow Jones Newswires

Rio Tinto PLC (RIO.LN) rebuffed another sweetened offer from mining and commodities rival Glencore PLC (GLN.LN) for its Australian coal assets, restating its preference for Yancoal Australia Ltd.'s own improved offer of $2.69 billion.

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In an escalation of the competitive bidding for the Rio coal business, Glencore last Friday said it submitted an all-cash offer of $2.68 billion for Coal & Allied Industries Ltd. (C&A), days after Rio turned down its first counterbid.

Switzerland-based Glencore said its bid, which includes a royalty linked to coal prices, for Rio's Coal & Allied Industries Ltd., is fully funded and worth at least $225 million more than an offer made by Yancoal, a unit of China's Yanzhou Coal Mining Co. Glencore also offered Rio Tinto a $225 million deposit to be forfeited--a so-called break fee--if the transaction failed to pass regulatory scrutiny.

Glencore's move further demonstrates renewed appetite for deal-making by Chief Executive Ivan Glasenberg almost two years after the Switzerland-based commodity giant experienced a downward spiral in share price. Mr. Glasenberg would, if he acquired the Rio business, gain more control to a company that is already one of the biggest coal traders in the world.

Rio's board of directors remained unmoved Monday. The mining company confirmed its recommendation that shareholders vote in favor of the sale of C&A to Yancoal on the grounds that the sweetened China-backed offer had a strong chance of completing. Rio has highlighted Yancoal's approval from regulators in China, a voracious consumer of coal.

Yancoal's most recent offer is worth around $2.69 billion, comprising $2.45 billion in cash payable in full on completion, as well as $240 million via unconditional guaranteed royalty payments of which $200 million will be received before the end of 2018.

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Glencore's originally proposed a $2.5 billion counter offer to the Yancoal's $2.45 billion initial bid.

-Write to Razak Musah Baba at razak.baba@wsj.com; Twitter: @Raztweet

(END) Dow Jones Newswires

June 26, 2017 06:25 ET (10:25 GMT)