Glencore raises bid for Rio Tinto’s Coal & Allied unit to $2.675 bn

Global trader and miner Glencore has made an improved irrevocable binding offer to acquire Rio Tinto's 100 per cent interest in Coal & Allied Industries Limited (C&A) for $2.675 billion in cash in addition to a coal price linked royalty.

Glencore said the entire amount is payable immediately upon completion of the transaction. ''The full US$2.675 billion cash consideration is payable in full on completion (no deferred payments).''

Rio Tinto had on Tuesday said it had selected China's Yancoal to buy its Coal & Allied division in Australia for $2.45 billion.

That was $100 million lower than a previous counter-bid from Glencore, but Rio said it believed Yancoal's offer could be completed more quickly because it had regulatory approvals. It also said it would not accept any bid that is at least $225 million greater than Yancoal's.

Glencore said its offer is fully funded and subject only to a limited number of regulatory approvals. 

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

The Glencore offer is conditional on approval from China, Korea, Taiwan and Australia. Japanese regulatory approval to acquire C&A has already been obtained.

Glencore, however, said there is no legal basis to consider that such approvals will not be obtained.

Glencore said it offer is supported by a $225 million deposit, which will be forfeited if the transaction does not complete as a result of a failure to obtain a regulatory approval.

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

In addition to receiving the earnings up to 1 September 2017 Rio Tinto will receive the greater of: post-tax cashflows of C&A for each month during the period from 1 September 2017 to completion, or $25 million per month post tax for each month during the period from 1 September 2017 to completion.

"We believe the Glencore offer satisfies the criteria for a 'superior proposal': it delivers substantially greater value to Rio Tinto shareholders and low deal completion risk," Glencore said in a statement.

Rio Tinto confirmed it had received the new offer and said it would give it "appropriate consideration".

Glencore said it would adjourn an annual general meeting scheduled for Tuesday and allow Yancoal two days to pursue a counter offer.

Glencore shares closed 0.8 per cent lower, while London-listed shares in Rio rose 0.5 per cent.