Rio Tinto PLC (LON:RIO) has confirmed Yancoal Australia as the preferred buyer for its Australian Coal & Allied business after the China-backed company yesterday lifted its offer for the unit to US$2.69bn to top rival increased bid from Glencore PLC (LON:GLEN).
Rio said Yancol’s revised offer comprises US$2.45bn in, cash payable in full on completion, as well as US$240mln via unconditional guaranteed royalty payments of which US$200mln will be received before the end of 2018.
READ: Glencore hikes offer for Rio Tinto’s Australian coal business
On Friday, Glencore said it was offering US$2.675bn in cash for C&A, plus a coal price linked royalty, up from its US$2.55bn offer made earlier this month, and at least US$225mln greater than Yancoal’s initial proposal which Rio had recommended earlier in the week.
Rio Tinto said its board has “considered both of the latest offers and is recommending Yancoal's improved offer to its shareholders based on greater transaction certainty and higher net present value.
Yancoal bid "offers compelling value to shareholders"
The FTSE 100-listed firm’s chief executive, Jean-Sebastien Jacques said in a statement: "The revised offer from Yancoal of US$2.69bn offers compelling value to our shareholders for our Australian thermal coal assets.
“This sale process has been in progress for a long period of time and we believe it is in the best interests of our shareholders to take the greater certainty of Yancoal's strong proposal."
Glencore said in its statement on Friday: “Rio Tinto must provide Yancoal with the opportunity to present a counter offer. If any such counter offer is determined by the Rio Tinto board to be equally or no less favourable than the competing proposal, then Rio Tinto must accept the Yancoal counter offer.”
READ: Glencore and Yancoal in bidding war for Rio Tinto's Australian coal mines
It said the offer would automatically lapse if Rio Tinto did not declare it to be the superior offer on June 26 and subsequently if a binding sales agreement is not clinched on July 5.
Rio Tinto said it had selected Yancoal to buy C&A because it believed the Chinese firm's offer could be completed more quickly as it had regulatory approvals, unlike the Glencore bid which has only been cleared by Japan.