Rio Tinto Plc has triggered an arbitration process with billionaire industrialist Sanjeev Gupta’s GFG Alliance because the company did not make final payments for its purchase of the Dunkerque aluminium smelter in France, Rio said on Monday.
Rio sold the smelter to GFG for $500 million last year in what was a standout deal for the emerging industrial powerhouse as it ramped up an acquisition spree.
But final payments for the sale to privately held GFG Alliance’s unit Liberty House are outstanding, Rio said in a statement.
“Rio Tinto confirms it has triggered an arbitration process in relation to the sale of the Dunkerque aluminium smelter, France, to Liberty House,” it said.
“The arbitration relates to non-payment of customary post-closure adjustments, including working capital, which was agreed by both parties in the sale and purchase agreement,” Rio said in the statement.
The Financial Times first reported the story on Monday saying that the outstanding payment was $50 million.
However, GFG Group said in a statement to Reuters that outstanding payment amount was “significantly smaller,” and that the transaction had been “very successful” and relationships with its banks were constructive.
“As is usual practice in sizeable mergers and acquisitions, there is a mechanism in place post-completion to settle the final consideration to be paid to the vendor net of working capital, accounting and other issues,” GFG said.
“This system is ongoing with the vendor as part of the normal process, and differences are being reconciled…This smelter is operating on budget, it is highly profitable and cash generative despite poor aluminium prices.”
(By Paulina Duran, Scott Murdoch and Melanie Burton; Editing by Christian Schmollinger)