Rio Tinto Plc (RIO) - Get Rio Tinto plc Sponsored ADR Report shares gained in London in late Friday trading after Glencore plc (GLNCY) increased its bid for the group's Australia-based coal assets to around $2.6 billion.
Glencore said the improved bid, revealed in a regulatory filing, values Coal & Allied Industries Ltd. at $2.675 billion, in a single payment, plus a royalty linked to future coal prices. That would be around $225 million higher than a proposed offer made earlier this week by Yancoal Australia Ltd., Rio's preferred buyer and a unit of China's Yanzhou Coal Mining Co.
"Glencore seems to be the natural owner of the assets, and could realise the highest synergies," wrote Paul Gait of Bernstein Research in a recent client note. "This is because Glencore's current coal assets are literally next to Rio's and therefore strong operational and trading synergies are expected (infrastructure, blending, trading). In addition, Glencore already achieves lower costs at its operations in the region than Rio."
Rio shares were marked 0.6% higher and changing hands at 3,055 pence each by 2:45 London time.
Glencore's latest swoop extends the bidding war for the Coal & Allied unit, which Glencore entered earlier this month with an unsolicited $2.55 billion approach, into its third week. The group said its offer expires on Monday June 26.
Glencore shares were marked 1% lower at 279.1 pence each after the improved bid was made public and have fallen 5.4% since the company first entered the bidding process for Coal & Allied.
Rio Tinto shareholders are due to vote on the sale at a general meeting on June 27 and Rio Tinto Ltd. investors will vote at a meeting to be held on June 29.