Rio Tinto ends deal with dissenting Turquoise Hill investors opposing mining giant’s £2.9bn takeover offer
- Turquoise Hill is the majority owner of the Oyu Tolgoi mining project in Mongolia
- Rio Tinto said it will now hold a shareholder vote on the proposed £2.9bn offer
- Approval of the deal requires acceptance from two-thirds of all voting investors
Rio Tinto Group has ended a pair of agreements with two minority investors who had expressed dissent over its prospective takeover of Turquoise Hill Resources.
The mining giant will now hold a shareholder vote on the £2.9billion acquisition of the remaining 49 per cent of the mineral exploration company that it does not own at an unspecified date.
Turquoise Hill is the majority owner of the Oyu Tolgoi mining project in Mongolia, which contains some of the world’s largest copper and gold deposits.
Minerals: Turquoise Hill is the majority owner of the Oyu Tolgoi mining project in Mongolia, which contains some of the world’s largest copper and gold deposits
Copper is set to play a vital role in helping the world transition away from fossil fuels because of its widespread use in renewable technologies, like electric vehicle batteries, wind turbines and solar panels.
Rio Tinto first made a move for complete control of the Canadian business in March, putting £2.3billion on the table before raising it to £2.6billion over the summer and then making a final bid of C$43 per share.
This last offer has still been heavily criticised by some of Turquoise’s minority investors, including investment group SailingStone Capital Partners, who said its acceptance would be one of ‘the biggest corporate governance failures’ in history.
Activist investor Pentwater Capital Management joined the chorus voicing its disapproval of the plan, arguing it was far below the free cash flow Turquoise is expected to generate over the next decade.
A fortnight ago, the pair, who hold around 17.3 per cent of Turquoise shares between them, agreed with Rio Tinto to withhold their votes on the deal at a special session that was due to take place on 8 November.
In return, they would receive 80 per cent of the $43-per-share takeover sum, with the remainder paid after arbitration over dissent proceedings and some other claims is conducted.
Dissent rights give shareholders a chance to sell their holdings at a value they believe is reasonable if a company makes a decision they oppose.
But the special meeting was subsequently suspended following ‘public interest concerns’ raised by Quebec’s securities regulator AMF, according to Turquoise.
Rio Tinto has said it will now go ahead with a vote and treat all minority investors as having ‘the same dissent rights and statutory process’ for the proposed bid.
It added: ‘The dissent process is a time-consuming and lengthy process that introduces uncertainty in relation to the consideration to be received and the potential for substantial legal costs.’
The transaction requires support from at least 50 per cent of votes cast by minority investors but two-thirds of all voting shareholders in order to be accepted.
Whether the takeover goes ahead or not, the mining sector faces a potentially challenging year ahead, with commodity prices set to continue declining after sharply rising in 2021.
In October, Rio Tinto downgraded the yearly forecast on iron ore shipments from its Pilbara operations in Australia, citing the downturn in the Chinese property market and interest rate hikes in Europe and Australia.
Rio Tinto Group shares were up 0.45 per cent to £53.91 on late Friday afternoon, meaning their value has grown by around a fifth in the past 12 months.