TIDMGLEN
RNS Number : 0475J
Glencore PLC
23 June 2017
Glencore plc
Baar, Switzerland
23 June, 2017
Glencore increases fully funded offer for Coal & Allied
Glencore has submitted an improved irrevocable binding offer
("Glencore Offer") to acquire Rio Tinto's 100% interest in Coal
& Allied Industries Limited ("C&A") for US$2.675 billion
cash plus a coal price linked royalty. All cash is payable in full
immediately upon completion.
The Glencore Offer is fully funded and subject only to a limited
number of regulatory approvals.
Improved Offer
Glencore's Offer has been designed to address the points raised
in Rio Tinto's announcement dated 20 June 2017 as follows.
-- Value: Glencore's Offer is at least US$225 million greater than Yancoal's proposal.
-- Payment timing: The full US$2.675 billion cash consideration
is payable in full on completion (no deferred payments).
-- Regulatory Risk:
o The Glencore Offer remains conditional only on approval from
China, Korea, Taiwan and Australia. Japanese regulatory approval to
acquire C&A has already been obtained.
o Glencore believes that there is no legal basis to consider
that such approvals will not be obtained.
o Demonstrating our confidence in securing all approvals,
Glencore's Offer is supported by a US$225 million deposit which
will be forfeited if the transaction does not complete as a result
of a failure to obtain a regulatory approval. Refer Appendix for
further details on regulatory approvals.
-- Timing Mitigation:
o 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.
o 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
-- US$25 million per month post tax for each month during the
period from
1 September 2017 to completion.
o This mechanism will also ensure that Rio Tinto will have no
significant downside coal price exposure from 1 September 2017
onwards.
-- Funding:
o Glencore's Offer is fully funded and is backed by a fully
enforceable guarantee from Glencore Plc.
o Glencore has no discretionary right to terminate the deal
where funding is not obtained on terms to its satisfaction - if
regulatory approvals are obtained then Glencore must complete.
o Glencore's Offer therefore provides far greater funding
certainty to Rio Tinto shareholders.
Superior Proposal
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.
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.
If successful, Glenore intends to mitigate its overall financial
commitment via a sale / monetisation of assets (prioritising its
coal portfolio) of no less than US$1.5 billion, including exploring
the option of selling down up to 50% of its interest in the C&A
mines. In any event, as part of overall Group financial policy, in
addition to targeting maximum 2x Net debt/Adjusted EBITDA through
the cycle, Glencore's balance sheet will be managed to prevent net
debt increasing above December 2016's level of US$15.5 billion,
thereby ensuring that our leverage target is comfortably met and
financial conservatism maintained.
Glencore's Offer will automatically lapse if it is not declared
by Rio Tinto to be a superior proposal by 6pm (BST) on 26 June 2017
and thereafter if a binding SPA has not been executed by 4pm (AEST)
on 5 July 2017.
For further information please contact:
Investors
Martin Fewings t: +41 41 m: +41 79 martin.fewings@glencore.com
709 2880 737 5642
Carlos Francisco t: +41 41 m: +41 79 carlos.fernandez@glencore.com
Fernandez 709 2369 129 9195
Media
Charles Watenphul t: +41 41 m: +41 79 charles.watenphul@glencore.com
Francis De 709 2462 904 3320 francis.de.rosa@glencore.com
Rosa m: +61 417 cass.mccarthy@glencore.com
Cass McCarthy 074 751
m: +61 439
178 151
www.glencore.com
This announcement contains inside information
Notes for Editors
Glencore is one of the world's largest global diversified
natural resource companies and a major producer and marketer of
more than 90 commodities. The Group's operations comprise around
150 mining and metallurgical sites, oil production assets and
agricultural facilities.
With a strong footprint in both established and emerging regions
for natural resources, Glencore's industrial and marketing
activities are supported by a global network of more than 90
offices located in over 50 countries.
Glencore's customers are industrial consumers, such as those in
the automotive, steel, power generation, oil and food processing
sectors. We also provide financing, logistics and other services to
producers and consumers of commodities. Glencore's companies employ
around 155,000 people, including contractors.
Glencore is proud to be a member of the Voluntary Principles on
Security and Human Rights and the International Council on Mining
and Metals. We are an active participant in the Extractive
Industries Transparency Initiative.
Glencore's coal business in Australia
Glencore is one of Australia's largest coal producers with 13
mining complexes - including 17 operational mines - across New
South Wales and Queensland.
We employ 7,500 Australians and in 2016 managed the production
of nearly 93 million tonnes of thermal and coking coal,
predominantly for export.
In NSW, we operate 11 coal mines that last year produced more
than 54 million tonnes of saleable thermal and coking coal.
We have a strong safety and environmental performance and play
an active role in the development of low emission coal
technology.
For more information, please visit www.glencore.com.au
www.facebook.com/Glencore
www.flickr.com/photos/glencore
www.instagram.com/glencoreplc
www.linkedin.com/company/8518
www.slideshare.net/glencore
www.twitter.com/glencore
www.youtube.com/glencorevideos
Disclaimer
The companies in which Glencore plc directly and indirectly has
an interest are separate and distinct legal entities. In this
document, "Glencore", "Glencore group" and "Group" are used for
convenience only where references are made to Glencore plc and its
subsidiaries in general. These collective expressions are used for
ease of reference only and do not imply any other relationship
between the companies. Likewise, the words "we", "us" and "our" are
also used to refer collectively to members of the Group or to those
who work for them. These expressions are also used where no useful
purpose is served by identifying the particular company or
companies.
Appendix: Regulatory approvals
Glencore has undertaken detailed analysis in relation to the
regulatory approvals required for the transaction. Based on this
analysis, Glencore believes that the risk of any regulatory
approval not being granted is low.
In reference to China, in 2016, total Chinese coal consumption
was approximately 3,600 million tonnes ("Mt"), China's total
imports of seaborne coal were approximately 228Mt and of this less
than 20Mt was sourced from all Hunter Valley producers
combined.
Based on public information, Glencore is reasonably confident
that c.1.5 - 2.0Mtpa C&A coal would generally be sold to China
each year. This represents less than 1% of China's seaborne imports
or c.0.05% of Chinese coal consumption. Total C&A managed coal
represents less than 0.4% of global coal production. Glencore
therefore believes that any concerns regarding Chinese anti-trust
approval risk are not justifiable.
Glencore has already obtained Japanese anti-trust approval for
the acquisition of C&A.
Underscoring the low regulatory approval risk, Glencore is
willing to forfeit a US$225 million deposit if the transaction does
not complete as a result of a failure to obtain a regulatory
approval.
ENDS
This information is provided by RNS
The company news service from the London Stock Exchange
END
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