Rio Tinto PLC (LSE:RIO) has entered into a definitive arrangement agreement to acquire full ownership of Turquoise Hill, and the giant Oyu Tolgoi copper project that it owns in Mongolia.
The Turquoise Hill board of directors has unanimously recommended minority shareholders vote in favour of Rio Tinto's offer of C$43.00 per share in cash.
This represents a premium of 67% to Turquoise Hill's closing price of C$25.68 per share on 11 March 2022, the day prior to Rio Tinto's initial public proposal to acquire Turquoise Hill.
Rio Tinto has agreed to provide Turquoise Hill with secured short-term liquidity during the transaction period of up to US$1.1bn, which would need to be repaid from an equity raising from shareholders in the first half of 2023 if the transaction is not approved by shareholders.
The deal follows years of wrangling over the funding of construction at Oyu Tolgoi, which is one of the world’s largest copper developments.
Turquoise Hill has estimated that it requires US$3.6bn of additional funding in total to complete the project.
"This transaction will simplify governance, improve efficiency and create greater certainty of funding for the long-term success of the Oyu Tolgoi project,” said Rio Tinto chief executive Jakob Stausholm.
“Rio Tinto's offer guarantees Turquoise Hill's minority shareholders outstanding value through a significant all-cash premium for their shares. After extensive negotiations, the terms of the transaction are final and there will be no further price increase. We look forward to working with the Turquoise Hill board of directors to ensure Turquoise Hill shareholders are able to realise the significant and immediate value of the transaction."
The transaction will be implemented by way of a Canadian Plan of Arrangement and require the approval of 66.67% of votes cast by all shareholders of Turquoise Hill, including Rio Tinto, and the approval of a simple majority of the votes cast by minority shareholders of Turquoise Hill.
A special meeting of shareholders of Turquoise Hill to approve the transaction is expected as early as possible in the fourth quarter of 2022 and, if approved, the transaction is expected to close shortly thereafter.
Rio Tinto currently beneficially owns just over 102mln shares of Turquoise Hill, representing approximately 51%.