Rio Tinto rebuffs Glencore bid for thermal coal assets

Rio Tinto has rebuffed a counter-bid for its Australian thermal coal assets from Glencore and recommended shareholders in favour of a sale to to Yancoal Australia.

Following Yancoal's bid for Rio's Coal & Allied Industries subsidiary, a counter proposal from Glencore was then met with improved terms from Yancoal for a single $2.45bn payment plus a royalty linked to the price of coal.

Rio's board said it was recommending the deal after Yancoal confirmed it has received or will waive all the regulatory approvals that are conditions precedent to its ability to close, including from China and Australia.

The FTSE 100 company said Glencore had not secured regulatory clearance from various jurisdictions including Australia and China or from the Korean or Taiwanese authorities "and there being uncertainty that these approvals can be achieved in a timely manner".

Rio expects there will be "a much faster completion timeframe under Yancoal's proposal" and that it was "in the best interests" of the company and shareholders to "transact on a basis that minimises uncertainty".

Chief executive Jean-Sébastien Jacques said the board believed Yancoal's bid "offers the best value and greater transaction certainty for shareholders", with the revised offer 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".

Under the UK and ASX listing rules, the transaction with Yancoal will require shareholder approval, with a UK shareholder meeting convened for 27 June and one in Australia for 29 June.

The board said it expected the transaction to complete in the third quarter of 2017.