Wrap Text
GLN - Glencore submits fully funded proposal to acquire Coal & Allied s
GLENCORE XSTRATA PLC
(Incorporated in Jersey under the Companies (Jersey) Law 1991)
(Registration number 107710)
JSE Share Code: GLN
LSE Share Code: GLEN
HKSE Share Code: 805HK
ISIN: JE00B4T3BW64
Baar, Switzerland
9 June, 2017
Glencore submits fully funded proposal to acquire Coal & Allied and
agrees conditional acquisition of Mitsubishi’s interest in Coal & Allied
mines
Glencore has submitted a proposal (“Glencore Proposal”) to acquire Rio Tinto’s 100% interest
in Coal & Allied Industries Limited (“C&A”) for US$2.55bn cash plus a coal price linked royalty,
with the cash comprising:
- US$2,050m cash payable on completion; and
- US$500m in aggregate deferred cash payments, payable as annual instalments of
US$100m over five years following completion.
The Glencore Proposal will be funded from existing cash resources and committed facilities and
is subject only to regulatory conditions.
A subsidiary of Mitsubishi Corporation (“Mitsubishi”) has a tag-along right to sell its 32.4%
interest in the Hunter Valley Operations joint venture (“HVO JV”). Glencore has agreed to
purchase Mitsubishi’s 32.4% interest in the HVO JV and 28.898% interest in the Warkworth
joint venture for US$920m cash conditional on completion of Glencore’s acquisition of C&A
from Rio Tinto, with US$520m being payable on completion and US$100m payable on the first
four anniversaries of completion.
There is no certainty that any transaction will be concluded. Glencore will only be bound once a
binding share purchase agreement (“SPA”) is concluded with Rio Tinto.
If a transaction is concluded, Glencore 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 our 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 will make further announcements in due course regarding the Glencore Proposal and
the Mitsubishi transaction.
Strategic rationale
The C&A assets comprise majority joint venture interests in large-scale long-life low-cost coal
mines in the Hunter Valley region of NSW. HVO (owned 67.6% by C&A, 32.4% Mitsubishi), Mt
Thorley (80% C&A) and Warkworth (55.6% C&A, 28.898% Mitsubishi) together produced
25.9mt in 2016 (100% basis) of premium quality export thermal coal and semi-soft coking coal.
C&A also has substantial regional landholdings and owns a 36.5% interest in Port Waratah
Coal Services, a coal export terminal located at the Port of Newcastle, the world’s largest coal
export facility.
The C&A mines lie adjacent to numerous existing Glencore mines in the heart of the Hunter
Valley, including our core Ravensworth North and Bulga mines. (Please see our press release
for maps detailing the mines).
The addition of the C&A assets to our existing portfolio in the Hunter Valley would unlock large
scale mining and operating synergies. Glencore’s combined portfolio of mines in the Hunter
Valley would have production capacity of 81 million tonnes per annum of high energy coal that
feeds increasing Asian demand for high efficiency, low emission coal.
Background to the Glencore Proposal
On 24 January 2017, Rio Tinto announced the terms of the potential sale of C&A to Yancoal
Australia Limited (“Yancoal”) (“Yancoal Deal”). The terms of the Yancoal Deal provide that Rio
Tinto may engage in negotiations or discussions with a third party if the Rio Tinto board, acting
in good faith, determines that a competing proposal is (or is reasonably likely to become) a
superior proposal and that compliance with the ‘no talk’ restriction would constitute a breach of
their fiduciary or statutory duties. To constitute a superior proposal, a competing proposal must
propose the acquisition of 100% of C&A for cash consideration (including any deferred
consideration and price adjustments) and royalty payments together having a net present value
exceeding the total value of the consideration payable under the Yancoal Deal by at least
$100m and be reasonably capable of being completed on a timely basis and be more
favourable to Rio Tinto shareholders.
Glencore believes that the Glencore Proposal satisfies the criteria for a “superior proposal” for,
amongst others, the following reasons:
- The Glencore Proposal is US$100m greater, but otherwise matches the key terms of the
Yancoal Deal.
- The Glencore Proposal is fully funded and is not subject to any funding condition or
termination right. By contrast, Yancoal has the right to terminate the Yancoal Deal if it is
unable to raise the funding, and its funding remains outstanding. In our view, the fully
funded Glencore Proposal provides substantially more deal certainty and is more
favourable to Rio Tinto shareholders.
- The Glencore Proposal is only subject to regulatory conditions, and in this regard,
Glencore has already received an approval from the Japanese anti-trust authorities.
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.
Glencore’s Proposal will automatically expire in the event a binding SPA has not been executed
by 26 June 2017.
For further information please contact:
Investors
Martin Fewings t: +41 41 709 2880 m: +41 79 737 5642 martin.fewings@glencore.com
Carlos Francisco Fernandez t: +41 41 709 2369 m: +41 79 129 9195 carlos.fernandez@glencore.com
Media
Charles Watenphul t: +41 41 709 2462 m: +41 79 904 3320 charles.watenphul@glencore.com
Australia
Francis De Rosa m: +61 41 7074751 francis.de.rosa@glencore.com
Cass McCarthy m: +61 43 9178151 cass.mccarthy@glencore.com
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
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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.
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