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Copper declined by 24 percent since Rio lobbed its bid www.news.mn
Rio Tinto’s bid to complete a takeover of Turquoise Hill Resources has received a boost after the most vocal opponents of the deal agreed not to vote at the shareholder meeting that will determine whether the USD 3.3 billion deal goes ahead.
Rio has owned almost 51 percent of Canadian listed Turquoise Hill for a decade but this year moved to acquire the remaining 49 percent as part of efforts to simplify the ownership structure of Mongolia’s Oyu Tolgoi copper mine.
Turquoise Hill owns 66 percent of Oyu Tolgoi but outsources management of the project to Rio, and that structure has triggered years of acrimony and distrust between the Mongolian government, Rio and minority shareholders in Turquoise Hill.
Two of the most vocal critics of Rio’s involvement in the Mongolian project over the past decade have been Sailingstone Capital Partners and Pentwater Capital Management; both of which have spent time as the second-biggest shareholder in Turquoise Hill and both of which have expressed dissatisfaction with Rio’s $C43 per share takeover offer.
But on Wednesday morning Australian time, Pentwater and Sailingstone agreed to withhold their votes at next week’s meeting of Turquoise Hill shareholders that will determine whether Rio’s bid is successful.
Pentwater and Sailingstone will instead exercise the rights offered by a quirk in Canadian mergers and acquisitions regulations, which allows shareholders in a target company to nominate their shares as “dissenting”.
The price received by dissenting shareholders is determined through a subsequent arbitration process that has no influence over whether the deal goes ahead.
In that sense, dissenting shareholders like Pentwater and Sailingstone take the risk that an arbiter may consider fair value for their shares to be lower than the $C43 offered by Rio, but they do so in the hope the arbiter will judge fair value to be higher than $C43.
On face value, Wednesday’s agreement appears to boost Rio’s chances of success at the meeting that will be held in Canada on November 8, because it eliminates two Turquoise Hill shareholders that appeared to be inclined to vote against the offer.
Rio originally offered $C34 per share when it first lobbed the takeover bid in March. Turquoise Hill shares traded as low as $C4.60 during the market rout of March 2020, but the stock recovered to average $C20.59 in the past year
Rio raised the bid to $C40 in August and $C43 in September, but proxy advisory firm Institutional Shareholders Services (ISS) has still told clients to reject the $C43 offer. Turquoise Hill shares were fetching $40.36 at the close of Canadian trading on Wednesday morning Australian time.
Copper was fetching $US3.49 per pound on Wednesday; prices for the red metal have declined by 24 percent since Rio lobbed its bid.
Published Date:2022-11-06
