(Alliance News) - Rio Tinto on Thursday said it has reached a new agreement to take full ownership of Turquoise Hill, owner of the massive Oyu Tolgoi copper-gold project in Mongolia, at an improved price of CAD43, around USD32.64, per share.
In August, Turquoise Hill said it was no longer considering Rio Tinto's takeover offer of CAD34 per share, flagging that conditions in both equity and copper markets had "changed significantly" since the March offer.
Rio Tinto returned last week with an improved offer of CAD40 per share, which Turquoise Hill acknowledged. On Thursday, the two said they have reached agreement in principle on a CAD43-per-share deal, valuing the Turquoise Hill minority share capital at USD3.3 billion.
"The transaction is the result of extensive negotiations between the special committee of independent directors of Turquoise Hill and Rio Tinto that took place following the receipt on August 24, 2022 of an improved non-binding proposal from Rio Tinto of CAD40 per share. These discussions ultimately culminated in the CAD43 per share consideration offered pursuant to the transaction, which has the unanimous support of the special committee," Turquoise Hill explained.
This further increased offer represents a premium of 67% to Turquoise Hill's closing price of CAD25.68 on March 11. The stock closed at CAD36.12 in Toronto on Wednesday, give the entire company a CAD7.27 billion, about USD5.52 billion, market capitalisation.
Rio Tinto currently holds a 51% stake in Turquoise Hill. If the deal is successful - it needs approval from just under 67% of Turquoise Hill shareholders - Rio Tinto will have increased its stake in the Oyu Tolgoi project to 66%, with the government of Mongolia holding the remaining 34%.
Rio Tinto shares were down 2.6% early Thursday.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 0.9% at 7,218.53
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Hang Seng: down 1.7% at 19,609.96
Nikkei 225: closed down 1.5% at 27,661.47
S&P/ASX 200: closed down 2.0% at 6,845.60
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DJIA: closed down 280.44 points, or 0.9%, at 31,510.43
S&P 500: closed down 31.16 points, or 0.8%, at 3,955.00
Nasdaq Composite: closed down 66.93 points, or 0.6%, at 11,816.20
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EUR: down at USD1.0021 (USD1.0064)
GBP: down at USD1.1590 (USD1.1638)
USD: up at JPY139.40 (JPY138.64)
GOLD: down at USD1,707.19 per ounce (USD1,720.40)
OIL (Brent): down at USD95.05 a barrel (USD97.05)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Thursday's key economic events still to come
0955 CEST Germany manufacturing purchasing managers' index
1000 CEST EU manufacturing PMI
1100 CEST EU unemployment
0930 BST UK manufacturing PMI
0730 EDT US Challenger job cuts
0830 EDT US unemployment insurance weekly claims report
0830 EDT US export sales
1000 EDT US manufacturing PMI
1000 EDT US construction spending
1530 EDT US Fed Atlanta President Raphael Bostic speaks
1600 EDT US domestic auto industry sales
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UK house price growth moderated a touch in August but remains elevated, the latest Nationwide house price index has shown. Nationwide said annual house price growth in the UK was 10% in August, easing from 11% in July but remaining in double-digits for the tenth month straight. The monthly rise accelerated to 0.8% from 0.2%. The average UK house price now stands at GBP273,751, up from GBP271,209 in July and having risen by almost GBP50,000 over the past two years. The UK housing market has shown resilience in recent months given higher interest rates and a squeeze on household incomes.
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Ireland's factory sector grew at its slowest pace in almost two years last month, survey results showed. The AIB Ireland manufacturing purchasing managers' index fell to 51.1 points in August from 51.8 in July, indicating the weakest growth since October 2020, according to survey compilers S&P Global. "The impact of weakening demand on Irish manufacturing activity is clearly evident in the third consecutive monthly contractions in both output and new orders," said AIB Chief Economist Oliver Mangan. More positively, employment in the sector continued to expand, though at its slowest pace since January 2021.
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The German retail sector held up better-than-expected in July. Sales were up 1.9% month-on-month, statistics body Destatis said, reversing a 1.5% decline the month before. The figure beat forecasts, according to FXStreet, as analysts had expected zero growth. On an annual basis, sales fell 2.6%, but again this marked an improvement on June, when sales had dropped 9.6%, and also beat the consensus forecast for a 6.5% decrease.
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BROKER RATING CHANGES
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JPMorgan resumes Pearson with 'overweight' - target 1,010 pence
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JPMorgan cuts Spirax-Sarco Engineering price target to 12,000 (13,200) pence - 'neutral'
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COMPANIES - FTSE 100
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Reckitt Benckiser said Chief Executive Laxman Narasimhan, who was appointed in September 2019, is stepping down to relocate back to the US. He will step down from the role at the end of this month. "Laxman has decided for personal and family reasons to relocate back to the United States and has been approached for an opportunity that enables him to live there," Reckitt explained. He will be replaced by Senior Independent Director Nicandro Durante while the company "evaluates and selects" the future leadership. Durante has previous experience heading up a FTSE 100 listing, having been the boss of British American Tobacco for eight years before leaving in 2019. "The chairman and the Nomination Committee have begun the process to identify the best long-term candidate to take Reckitt on the next phase of its growth and transformation journey," said Reckitt. Durante was appointed to the Reckitt board in December 2013.
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Barclays said it has agreed to sell its entire 7.4% stake in South African lender Absa for ZAR10.66 billion, around GBP538 million. Barclays sold 63.1 million shares at a price of ZAR169.0 each, being a 5.1% discount to Absa's closing price of ZAR178.02 in Johannesburg on Wednesday.
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COMPANIES - FTSE 250
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Kainos backed market forecasts for its current financial year with trading since the start of April strong across both its business areas. It placed consensus at GBP62.7 million to GBP66.5 million in adjusted pretax profit on GBP335.7 million to GBP373.4 million in revenue. "While we are cognisant of the global macroeconomic landscape, our robust pipeline, strong balance sheet and significant contracted backlog underpin our confidence in our outlook. As a result, we believe that we are well-positioned for further growth and remain confident in our strategy," the software company said.
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COMPANIES - SMALL CAP
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Jet2, ahead of its annual general meeting, said it is on track to meet market expectations with customer bookings "consistently strong". The airline and tour operator said airport disruption has "abated significantly" after a bumpy start to the summer season "due to the lack of planning and investment by many airports and associated suppliers". Customer bookings are being made a bit later than normal, but remain strong. Winter forward bookings are "satisfactory", it added, matching the winter 2019-20 season at the same point despite a 2% increase in capacity. "With some way still to go in the Leisure Travel winter booking cycle, we are currently on track to achieve current market expectations for group profit before foreign exchange revaluations and taxation for the year ending 31 March 2023," said Executive Chair Philip Meeson.
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COMPANIES - GLOBAL
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The EU's drug regulator is on Thursday expected to authorise the first Covid-19 vaccines for the Omicron variant, although they do not target the latest strains. The adapted vaccines made by Pfizer/BioNTech and Moderna will be discussed during an extraordinary meeting of the European Medicines Agency. European nations have been keen to rush through the new generation of jabs so they can start booster campaigns ahead of a feared Covid surge this winter. The two so-called "bivalent" vaccines protect against the earlier BA.1 strain of Omicron, as well as the original Covid virus that emerged in China in 2019. They do not however target the newer and more infectious BA.4 and BA.5 types, which have emerged in recent months as the dominant strains worldwide.
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Thursday's shareholder meetings
Carclo PLC - AGM
Circassia Group PLC - GM name change
Jet2 PLC - AGM
JLEN Environmental Assets Group Ltd - AGM
Phoenix Global Resources PLC - GM cancellation of listing
Picton Property Income Ltd - AGM
Watches of Switzerland Group PLC - AGM
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By Tom Waite; thomaslwaite@alliancenews.com
Copyright 2022 Alliance News Limited. All Rights Reserved.
Rio Tinto (RIO)
Pearson (PSON)
Spirax-Sarco (SPX)
