Wrap Text
GLN-Glencore increases fully funded offer for Coal & Allied
Glencore 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
23 June, 2017
Glencore increases fully funded offer for Coal & Allied
Glencore has submitted an improved irrevocable binding offer (“Glencore Offer”) to acquire Rio
Tinto’s 100% interest in Coal & Allied Industries Limited (“C&A”) for US$2.675 billion cash plus a
coal price linked royalty. All cash is payable in full immediately upon completion.
The Glencore Offer is fully funded and subject only to a limited number of regulatory approvals.
Improved Offer
Glencore’s Offer has been designed to address the points raised in Rio Tinto’s announcement dated
20 June 2017 as follows.
Value: Glencore’s Offer is at least US$225 million greater than Yancoal’s proposal.
Payment timing: The full US$2.675 billion cash consideration is payable in full on
completion (no deferred payments).
Regulatory Risk:
o The Glencore Offer remains conditional only on approval from China, Korea, Taiwan
and Australia. Japanese regulatory approval to acquire C&A has already been
obtained.
o Glencore believes that there is no legal basis to consider that such approvals will not
be obtained.
o Demonstrating our confidence in securing all approvals, Glencore’s Offer is
supported by a US$225 million deposit which will be forfeited if the transaction does
not complete as a result of a failure to obtain a regulatory approval. Refer Appendix
for further details on regulatory approvals.
Timing Mitigation:
o Glencore believes that it will obtain all regulatory approvals in a timely manner and
that its offer fully compensates Rio Tinto for any potential delays beyond Yancoal’s
expected completion date as announced by Rio Tinto.
o In addition to receiving the earnings up to 1 September 2017 Rio Tinto will receive
the greater of:
post tax cashflows of C&A for each month during the period from 1
September 2017 to completion, or
US$25 million per month post tax for each month during the period from
1 September 2017 to completion.
o This mechanism will also ensure that Rio Tinto will have no significant downside coal
price exposure from 1 September 2017 onwards.
Funding:
o Glencore’s Offer is fully funded and is backed by a fully enforceable guarantee from
Glencore Plc.
o Glencore has no discretionary right to terminate the deal where funding is not
obtained on terms to its satisfaction – if regulatory approvals are obtained then
Glencore must complete.
o Glencore’s Offer therefore provides far greater funding certainty to Rio Tinto
shareholders.
Superior Proposal
We believe the Glencore Offer satisfies the criteria for a “superior proposal”: it delivers substantially
greater value to Rio Tinto shareholders and low deal completion risk.
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.
If successful, Glenore 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 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’s Offer will automatically lapse if it is not declared by Rio Tinto to be a superior proposal by
6pm (BST) on 26 June 2017 and thereafter if a binding SPA has not been executed by 4pm (AEST)
on 5 July 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
Francis De Rosa m: +61 417 074 751 francis.de.rosa@glencore.com
Cass McCarthy m: +61 439 178 151 cass.mccarthy@glencore.com
www.glencore.com
This announcement contains inside information
Page 3
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
Follow us on social media:
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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. Page 4
Appendix: Regulatory approvals
Glencore has undertaken detailed analysis in relation to the regulatory approvals required for the
transaction. Based on this analysis, Glencore believes that the risk of any regulatory approval not
being granted is low.
In reference to China, in 2016, total Chinese coal consumption was approximately 3,600 million
tonnes (“Mt”), China’s total imports of seaborne coal were approximately 228Mt and of this less than
20Mt was sourced from all Hunter Valley producers combined.
Based on public information, Glencore is reasonably confident that c.1.5 – 2.0Mtpa C&A coal would
generally be sold to China each year. This represents less than 1% of China’s seaborne imports or
c.0.05% of Chinese coal consumption. Total C&A managed coal represents less than 0.4% of
global coal production. Glencore therefore believes that any concerns regarding Chinese anti-trust
approval risk are not justifiable.
Glencore has already obtained Japanese anti-trust approval for the acquisition of C&A.
Underscoring the low regulatory approval risk, Glencore is willing to forfeit a US$225 million deposit
if the transaction does not complete as a result of a failure to obtain a regulatory approval.
ENDS
Sponsor
Absa Bank Limited (acting through its Corporate and Investment Banking Division)
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