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“Rio Tinto is committed to moving Oyu Tolgoi forward in direct partnership with the Government of Mongolia to realise its full potential for all stakeholders. This agreement represents another significant step following the recent commencement of the underground operations, and will simplify governance, improve efficiency and create greater certainty of funding for the long-term success of the Oyu Tolgoi project.”
Photo Credit : Rio Tinto
Rio Tinto and Turquoise Hill Resources Ltd. have reached an agreement in principle for Rio Tinto to acquire the approximately 49% of the issued and outstanding common shares of Turquoise Hill that Rio Tinto does not currently own for C$43 per share in cash. The agreement has the unanimous approval of the independent Special Committee of Turquoise Hill’s Board of Directors, and values the Turquoise Hill minority share capital at approximately US$3.3 billion.
The purchase price of C$43 per share in cash represents Rio Tinto’s best and final offer and a premium of:
The Transaction is to be implemented by way of a plan of arrangement under the Business Corporations Act (Yukon) and both companies intend to expeditiously finalise an arrangement agreement (the “Arrangement Agreement”). An announcement will be made with details of the Arrangement Agreement once executed.
The Transaction will require the approval of 66.67% of votes cast by shareholders of Turquoise Hill (including Rio Tinto) and the approval of a simple majority of the votes cast by minority shareholders of Turquoise Hill. A special meeting of shareholders of Turquoise Hill to approve the Transaction is expected as early as possible in the fourth quarter of 2022 and, if approved, the Transaction is expected to close shortly thereafter.
Rio Tinto and Turquoise Hill have also agreed in principle to the following amendments to the financing Heads of Agreement, to become effective concurrently with the execution of the Arrangement Agreement, to support Turquoise Hill in addressing near term liquidity:
Rio Tinto Chief Executive Jakob Stausholm said: “Rio Tinto is committed to moving Oyu Tolgoi forward in direct partnership with the Government of Mongolia to realise its full potential for all stakeholders. This agreement represents another significant step following the recent commencement of the underground operations, and will simplify governance, improve efficiency and create greater certainty of funding for the long-term success of the Oyu Tolgoi project.”
Rio Tinto Copper Chief Executive Bold Baatar said: “The transaction simplifies the ownership structure of Oyu Tolgoi and enables Rio Tinto to focus on working in partnership directly with Erdenes Oyu Tolgoi and the Government of Mongolia to create long-term value for all stakeholders.
“Turquoise Hill minority shareholders will realise a significant and immediate cash premium for their shares at a time when uncertainties inherent in the development of the underground operations remain. Turquoise Hill will also avoid the issuance of any equity component as part of the US$3.6 billion incremental funding requirement through to the completion of the Oyu Tolgoi project. Securing the approval of the Special Committee to our agreement in principle, following extensive negotiations, was essential for Rio Tinto to progress this proposed transaction.”
Credit Suisse, RBC Capital Markets and Rothschild & Co are acting as financial advisors to Rio Tinto, and McCarthy Tétrault LLP and Sullivan & Cromwell LLP are acting as legal advisors.
BMO Capital Markets is acting as the exclusive financial advisor to the Turquoise Hill Special Committee and Blake, Cassels & Graydon LLP is acting as its legal advisor. TD Securities has been retained by the Special Committee as an independent valuator in accordance with applicable securities laws.
Norton Rose Fulbright Canada LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP are acting as Canadian and U.S. legal counsel, respectively, to Turquoise Hill.
If the Transaction is successful Rio Tinto will hold a 66% interest in Oyu Tolgoi with the remaining 34% owned by the Government of Mongolia.