Glencore PLC’s Ivan Glasenberg is looking to trump China’s Yanzhou Coal Mining Co (兗州煤業) with a rival bid for Rio Tinto Group coal assets in Australia.
The company’s chief executive officer submitted a proposal to buy Rio’s Coal and Allied coal unit in New South Wales, Australia, for US$2.55 billion, the Baar, Switzerland-based producer and trader said on Friday in a statement.
If successful, the company would also seek to buy Mitsubishi Corp’s stakes in two coal ventures for US$920 million in the same area.
The moves threaten to squeeze out a rival bid by Yanzhou’s Yancoal Australia unit, which in January offered US$2.45 billion for the Rio unit. That offer includes an initial US$1.95 billion cash payment and US$500 million in annual installments of US$100 million following completion.
In a statement on Friday, Rio said its board and management would give the Glencore proposal “appropriate consideration and respond in due course.”
Glencore’s bid for the coal assets comes just weeks after it expressed interest in a combination with grain trader Bunge Ltd, as Glasenberg steps up expansion efforts following a painful commodities downturn, in which it was forced to sell assets and cut costs.
While Glencore was publicly rebuffed by the US grain-trading giant, Glasenberg signaled he would not waver in his ambition to expand in agriculture.
If the Rio deal goes through, Glencore would sell at least US$1.5 billion in assets to mitigate the cost, it said in the statement.
The Rio coal operations are adjacent to existing Glencore mines in Australia’s Hunter Valley, and would take Glencore’s production capacity in the area to 81 million metric tonnes a year.
In 2014, Glencore and Rio considered merging their coal businesses. At the time, Credit Suisse Group AG estimated it would save the two companies more than US$500 million.
“Rio wants out of thermal coal, so this could create a win-win for both,” Clarksons Platou Securities Inc analyst Jeremy Sussman said.
Glencore’s American depository receipts fell 1.2 percent at 3:23pm in New York. The receipts have increased 9.8 percent year.
“There is no certainty that any transaction will be concluded,” Glencore said in the statement, adding that the deal would be funded from existing cash and committed facilities. “Glencore will only be bound once a binding share purchase agreement is concluded with Rio Tinto.”
The Yanzhou unit has the right to present a counter offer.
Glencore’s proposal expires if a binding purchase agreement has not been executed by June 26.
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