Rio Tinto Ltd said on Friday it would plough ahead with a $3.3 billion bid to buy the 49% of Canada’s Turquoise Hill Resources that it does not already own, after it ended separate talks with dissenting minority shareholders.
The Anglo-Australian miner is seeking to simplify its management of the giant Oyu Tolgoi copper mine in Mongolia that it operates, but shares ownership through Turquoise Hill and the Mongolian government.
Rio needs two-thirds of voting Turquoise Hill shareholders to back its bid, including its own 51% stake, and a simple majority of the rest of the voting shareholders.
It has raised its offer for Turquoise Hill twice to C$43, but that has failed to satisfy Pentwater Capital and SailingStone Capital, two of its biggest minority shareholders, which own stakes of 15.2% and 2.2%, respectively.
Rio had reached an agreement with both that they would abstain from a shareholder vote on the proposal on Nov. 15. Turquoise Hill, investors and the Canadian regulator raised concerns that minority shareholders could be treated differently under the agreement’s conditions.
“This announcement just takes us back to where we were 4-5 weeks ago,” Barrenjoey analyst Glyn Lawcock said, adding that he expected a new shareholder vote before the year ends.
“There isn’t a carve-out for (Pentwater and SailingStone). What that means is that everyone is in the same camp. We don’t know what Pentwater and SailingStone will do, but it will be close.”
Turquoise Hill has twice pushed back the shareholder vote on Rio’s proposal.
Turquoise on Friday acknowledged Rio’s announcement and said it plans to apply to the Supreme Court of Yukon for an amended interim order to set a new date for the special meeting.
Rio Tinto Copper Chief Executive Officer Bold Baatar said, “We have acknowledged feedback received from minority shareholders and returned to the proposal originally unanimously recommended by the Turquoise Hill Special Committee.”
(By Sameer Manekar; Editing by Shailesh Kuber and Rashmi Aich)