Freight Rail

Rio shareholders vote for Yancoal Hunter takeover

Rio Tinto shareholders have approved a takeover of the mining giant’s Hunter Valley coal business to Chinese-backed miner Yancoal, after a competitive bidding process.

Yancoal will buy Rio’s Hunter coal assets – incorporated as Coal & Allied – including the Warkworth and Mount Thorley thermal and semi-soft coking coal mines, and a share in the Port Waratah Coal Terminal at the Port of Newcastle, for US$2.69 billion (A$3.5 billion).

97.2% of the shares represented in the voting process voted in favour of the sale, while 2.8% of the voting shares were against the move. Shareholders owning around 45 million shares – roughly 4% – of Rio’s ownership abstained from the vote.

The result followed a fortnight of frantic negotiations between Rio Tinto, Yancoal, and second bidder Glencore.

This sale of Coal & Allied to Yancoal was initially announced on January 24, for $1.95 billion, and $500 million of payments deferred over five years.

But Glencore kicked off a bidding war on June 9, offering Rio $2.05 billion up-front, plus $500 million in deferred payments over five years.

Yancoal then made a more appealing offer, saying it would pay all $2.45 billion of its initial offer up-front.

Glencore responded by upping the bid to $2.675 billion up-front on June 23, along with a minimum of $175 million in additional payments.

Yancoal then submitted a further proposal to acquire C&A for $2.45 billion up-front, along with $240 million in guaranteed, and unconditional royalty payments, of which $200 million will be received by the end of 2018.

All bids throughout the process also included coal price-linked royalties. The final, successful bid by Yancoal offered a royalty capped at $410 million.

“The board has now considered the latest offers received from Glencore and Yancoal in recent days and is recommending Yancoal’s improved offer to shareholders based on greater transaction certainty and a higher net present value,” Rio chairman Jan du Plessis told shareholders ahead of the Thursday vote.