Miner-trader Glencore (GLEN.L) on Friday said it had offered $2.55 billion cash for coal mines owned by Rio Tinto (RIO.L) (RIO.AX) in Hunter Valley, Australia, outbidding a previous offer from Chinese-owned Yancoal.
The large-scale, long-life assets are next to mines already owned by Glencore, which has predicted continued demand for coal, especially in Asia, despite environmental opposition to the most polluting form of fossil fuel.
In January, Rio said it was selling its interest in Coal & Allied Industries Limited (C&A) to Yancoal Australia Limited (YAL.AX) for $2.45 billion. The terms allowed Rio to engage in negotiations with another party if it made a better offer.
Glencore’s proposal is $100 million higher and fully funded, but Rio Tinto has to give Yancoal the chance to make a counter offer, opening the way for a bidding war. Rio said in a statement it had received the offer and would respond “in due course”.
Analysts say Glencore has long been interested in the assets and predicted its offer could succeed. “We cannot see Rio refusing unless it feels it will hurt its cosy China relationships,” Hunter Hillcoat of Investec said.
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