Rio Tinto ends deal with dissident Turquoise Hill investors opposed to mining giant’s £2.9bn takeover bid
- Turquoise Hill is the majority owner of the Oyu Tolgoi mining project in Mongolia
- Rio Tinto said it would now hold a shareholder vote on the proposed £2.9bn bid
- Approval of the deal requires acceptance by two-thirds of all voting investors
Rio Tinto Group has terminated a pair of deals with two minority investors who had expressed disagreement over its potential takeover of Turquoise Hill Resources.
The mining giant will now hold a shareholder vote on the £2.9bn acquisition of the remaining 49% of the mining exploration company it does not own on an unspecified date.
Turquoise Hill is the majority owner of the Oyu Tolgoi mining project in Mongolia, which contains some of the largest deposits of copper and gold in the world.
Minerals: Turquoise Hill is the majority owner of the Oyu Tolgoi mining project in Mongolia, which contains some of the largest deposits of copper and gold in the world.
Copper is set to play a vital role in helping the world shift away from fossil fuels due to its widespread use in renewable technologies, such as electric vehicle batteries, wind turbines and solar panels.
Rio Tinto first took full control of the Canadian business in March, putting £2.3bn on the table before raising it to £2.6bn over the summer and then make a final offer of C$43 per share.
This latest offer has always been heavily criticized by some of Turquoise’s minority investors, including investment group SailingStone Capital Partners, which said its acceptance would be one of the company’s “greatest corporate governance failures”. story.
Activist investor Pentwater Capital Management joined the chorus in voicing its disapproval of the plan, arguing that it fell far short of the free cash flow Turquoise is expected to generate over the next decade.
A fortnight ago the pair, which owns around 17.3% of Turquoise shares, agreed with Rio Tinto not to vote on the deal at a special session due to take place on November 8.
In return, they would receive 80% of the sum of $43 per share, with the remainder paid after arbitration of the dissent proceedings and other claims.
Dissent rights give shareholders the ability to sell their holdings at a value they deem reasonable if a company makes a decision they object to.
But the special meeting was later suspended following “public interest concerns” raised by the AMF, Quebec’s securities regulator, according to Turquoise.
Rio Tinto said it would now take a vote and treat all minority investors as having “the same dissent rights and statutory process” for the proposed bid.
He added: “The dissent process is a long and drawn-out process that introduces uncertainty as to the consideration to be received and the possibility of substantial legal costs.”
The transaction requires the support of at least 50% of the votes cast by minority investors but two-thirds of all voting shareholders to be accepted.
Whether the takeover materializes or not, the mining sector faces a potentially challenging year, with commodity prices expected to continue falling after rising sharply in 2021.
In October, Rio Tinto lowered the annual forecast for iron ore shipments from its Pilbara operations in Australia, citing a slowing Chinese property market and rising interest rates in Europe and Australia.
Rio Tinto Group shares were up 0.45% at £53.91 late Friday afternoon, meaning their value is up around a fifth in the past 12 months.