Rio Tinto and Mitsubishi Corp have proposed buying out Coal & Allied for A$1.49bn (£950m), aiming to take full control of the Australian miner to take advantage of strong coal prices.
Rio and Mitsubishi offered A$122 a share, a 34 per cent premium to the coal miner's last trade, to buy out the 14 per cent they do not already own. Coal & Allied shares surged 28 per cent to a four-month high.
Top institutional shareholder Perpetual Investments, which owns 6.3 per cent, backed the offer. That makes the takeover nearly certain to be completed once Rio Tinto and Mitsubishi finalise their agreement to enter a joint bid.
Despite a strong currency, global economic uncertainty and new taxes, Australian resource companies have been sought-after takeover targets as the demand boom from China, India driving commodity prices is expected to continue.
The bid follows Peabody Energy and ArcelorMittal's $5bn(£3bn) hostile bid for Macarthur Coal and Rio Tinto's $4bn takeover of Mozambique-focussed coal miner Riversdale Mining earlier this year.
Mitsubishi appeared set to fund about 70 per cent of the deal and the proposal would see it double its stake in Coal & Allied to 20 per cent. Rio Tinto would increase its stake to 80 percent from 75.7 per cent.
That would boost Mitsubishi's equity holding in thermal coal production to nearly 13m tonnes a year without having to pay the hefty prices that Indian companies have been paying for coal projects in Australia and Indonesia.
"It would be a lot cheaper for Mitsubishi to buy shares in the company they know well than acquiring a stake in a new mine," said Yasuhiro Narita, an analyst at Nomura Securities.
City A.M. Reporter