Glencore share price: Group increases offer for Rio Tinto's coal mines

Glencore share price: Group increases offer for Rio Tinto's coal mines”

Rio Tinto plc (LON:RIO) had its price target boosted by Deutsche Bank AG from GBX 4,140 ($52.75) to GBX 4,200 ($53.51) in a research report sent to investors on Thursday morning, reports.

Glencore said its offer meets Rio Tinto's demand that the offer should be at least $225 million greater than rival Yancoal's proposal.

"Glencore therefore believes that any concerns regarding Chinese antitrust approval risk are not justifiable", the company said.

"Glencore certainly aren't making life easy for Rio", said Paul Gait, an analyst at Sanford C. Bernstein London.

Glencore has long sought to own Rio's Hunter Valley coal assets, which adjoin mines it already has, offering the possibility for synergies and blending coal to optimize value. It is in the best interests of Rio Tinto shareholders and employees, and Coal & Allied business customers and other stakeholders, to transact on a basis that minimises uncertainty.

As a further sweetener, it has offered to let Rio keep the cashflows from the business until the deal completes.

Glencore said the mechanism would also ensure Rio Tinto would have no significant downside coal price exposure from September 1 onwards.

"In the event that the Rio Tinto board requires additional time to give the Glencore proposal appropriate consideration then the Rio Tinto board may adjourn the general meetings of Rio Tinto plc and Rio Tinto Limited (the Australian company)". Japanese regulatory approval to acquire C&A has already been obtained, it added. "To win the deal, Yancoal's counter-offer needs to be considered just as favourable as the revised Glencore bid, for Rio to accept it", it said.

In addition to receiving the earnings of Coal & Allied up to September 1, Glencore said Rio would receive cash compensation beyond that date until its deal was signed off by regulators.

Glencore said it believed it would obtain all regulatory approvals in a timely manner and that its offer fully compensated Rio Tinto for any potential delays beyond Yancoal's expected completion date as announced by Rio Tinto.

Approvals are required from China, Korea, Taiwan and Australia.

Analysts say Rio has deep ties with China, the world's biggest commodity market, which it will not wish to damage, but Glencore's offer is clearly higher.

Yancoal, one of Australia's largest and leading coal miners, has been named by Rio Tinto as the favoured buyer of its wholly-owned subsidiary, Coal & Allied Industries. The three operations produced 25.9 million tonnes (Mt) of thermal and semi-soft coking coal in 2016, of which 17.1Mt were Rio Tinto's share.

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