Rio Tinto has once again named Yancoal Australia as the preferred buyer of its Australian Coal & Allied thermal coal operation over Glencore as Yancoal improved its offer to $2.69 billion.
The miner said in a statement Monday that its shareholders had voted in favor of Yancoal due to the improved offer and a "high level of completion certainty."
In the newest offer in a bidding war for Coal & Allied, Yancoal Monday upped its offer to $2.45 billion in cash payable in full on completion, $240 million via unconditional guaranteed royalty payments, an increased break fee amount of $225 million provided by Yancoal parent company Tankuang and the receipt or waiver of all regulatory approvals required to close the transaction.
Rio added that Yancoal's offer also had "a faster and more certain timetable," and presented greater net present value "given the uncertainty of receipt of certain cash flows under Glencore's revised terms."
On Friday Glencore had upped its offer to $2.675 billion after Rio had snubbed its previous offer in favor of Yancoal's.
It said now that all parties had provided improved terms, it was in the best interest of shareholders to put Yancoal's newest offer to a vote on the current timetable. Rio will hold meetings Tuesday and Thursday to seek shareholder approval.
Rio Tinto CEO Jean-Sebastien Jacques said in the statement that the company believed that "it is in the best interests of our shareholders to take the greater certainty of Yancoal's strong proposal."
RBC Capital Markets analysts said the competition around the Coal & Allied assets might be an indicator of the improving health of mining companies across the board, and represent a shift in philosophy where companies were willing to seek merger and acquisition options for growth.
"This would be positive for producers with high quality assets," it said.
RBC valued the Coal & Allied assets at $2.019 billion (RBC base case).
