Ivanhoe Mines to Scrap Rights Plan as Rio Seeks Larger Stake
Jan. 19 (Bloomberg) -- Ivanhoe Mines Ltd. decided to scrap a so-called shareholder rights plan, clearing the way for Rio Tinto Group to increase its stake and gain control of the developer of the Oyu Tolgoi copper mine in Mongolia.
Ivanhoe will recommend investors vote to end the rights plan at the company’s next annual meeting on May 11 and delay activating the plan until then, Vancouver-based Ivanhoe said yesterday in a statement.
Rio, the world’s third-biggest mining company, has been restricted to holding a 49 percent stake in Ivanhoe by a standstill agreement, which was set to expire yesterday, Ivanhoe said. The London-based company has advised Ivanhoe it intends to acquire additional shares to raise its stake to more than 50 percent, regardless of the rights plan, Ivanhoe said.
At stake is control of one of the world’s largest untapped copper and gold deposits that Rio estimates will cost about $6 billion to develop. Ivanhoe owns 66 percent of Oyu Tolgoi and the Mongolian government controls the remainder.
“This is very good news in terms of Ivanhoe being taken over by Rio,” Ray Goldie, a Toronto-based analyst at Salman Partners Inc., said in a telephone interview. “It makes it a lot easier for Rio or anyone else.”
Ivanhoe rose 0.1 percent to C$19.31 in Toronto yesterday, giving it a market value of C$14.3 billion ($14.1 billion). Rio rose 0.4 percent to 3,710.5 pence in London.
“We welcome Ivanhoe’s decision to suspend immediately the shareholder rights plan,” Rio said yesterday in an e-mailed statement. “We are free to increase our shareholding as we see fit, without triggering the plan.”
Arbitration Ruling
An arbitrator ruled last month that Rio would be allowed to maintain its ownership level in Ivanhoe if Rio’s actions triggered the rights plan. Rio had said the plan contravened a 2006 agreement between the two companies.
The so-called poison pill would have allowed Ivanhoe to issue new shares to block an attempted takeover.
Ivanhoe’s board adopted its rights plan in April 2010 “to protect all shareholders, while allowing takeover bids that are made to all shareholders and that satisfy certain conditions,” the company said last month.
Founder and Chief Executive Officer Robert Friedland controls about 14 percent of Ivanhoe stock, according to data compiled by Bloomberg.
Bridge Financing
Ivanhoe also said yesterday its board approved a $1.8 billion bridge financing that could be used to complete the first phase of Oyu Tolgoi.
Ivanhoe and Rio are working toward arranging as much as $4 billion of financing for the project, according to the statement. Their plan is to complete the financing in the second quarter.
Oyu Tolgoi, which is 80 kilometers (50 miles) north of Mongolia’s border with China, contains an estimated 81 billion pounds of copper and 46 million ounces of gold, according to Ivanhoe’s website. The project will be one of the world’s five biggest copper mines, according to Rio, which is managing development.
Construction is now more than 70 percent complete and initial production is expected in the middle of this year, Ivanhoe said yesterday.
--With assistance from Jesse Riseborough in London. Editors: Steven Frank, Simon Casey
To contact the reporter on this story: Christopher Donville in Vancouver at cjdonville@bloomberg.net
To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net
Ivanhoe will recommend investors vote to end the rights plan at the company’s next annual meeting on May 11 and delay activating the plan until then, Vancouver-based Ivanhoe said yesterday in a statement.
Rio, the world’s third-biggest mining company, has been restricted to holding a 49 percent stake in Ivanhoe by a standstill agreement, which was set to expire yesterday, Ivanhoe said. The London-based company has advised Ivanhoe it intends to acquire additional shares to raise its stake to more than 50 percent, regardless of the rights plan, Ivanhoe said.
At stake is control of one of the world’s largest untapped copper and gold deposits that Rio estimates will cost about $6 billion to develop. Ivanhoe owns 66 percent of Oyu Tolgoi and the Mongolian government controls the remainder.
“This is very good news in terms of Ivanhoe being taken over by Rio,” Ray Goldie, a Toronto-based analyst at Salman Partners Inc., said in a telephone interview. “It makes it a lot easier for Rio or anyone else.”
Ivanhoe rose 0.1 percent to C$19.31 in Toronto yesterday, giving it a market value of C$14.3 billion ($14.1 billion). Rio rose 0.4 percent to 3,710.5 pence in London.
“We welcome Ivanhoe’s decision to suspend immediately the shareholder rights plan,” Rio said yesterday in an e-mailed statement. “We are free to increase our shareholding as we see fit, without triggering the plan.”
Arbitration Ruling
An arbitrator ruled last month that Rio would be allowed to maintain its ownership level in Ivanhoe if Rio’s actions triggered the rights plan. Rio had said the plan contravened a 2006 agreement between the two companies.
The so-called poison pill would have allowed Ivanhoe to issue new shares to block an attempted takeover.
Ivanhoe’s board adopted its rights plan in April 2010 “to protect all shareholders, while allowing takeover bids that are made to all shareholders and that satisfy certain conditions,” the company said last month.
Founder and Chief Executive Officer Robert Friedland controls about 14 percent of Ivanhoe stock, according to data compiled by Bloomberg.
Bridge Financing
Ivanhoe also said yesterday its board approved a $1.8 billion bridge financing that could be used to complete the first phase of Oyu Tolgoi.
Ivanhoe and Rio are working toward arranging as much as $4 billion of financing for the project, according to the statement. Their plan is to complete the financing in the second quarter.
Oyu Tolgoi, which is 80 kilometers (50 miles) north of Mongolia’s border with China, contains an estimated 81 billion pounds of copper and 46 million ounces of gold, according to Ivanhoe’s website. The project will be one of the world’s five biggest copper mines, according to Rio, which is managing development.
Construction is now more than 70 percent complete and initial production is expected in the middle of this year, Ivanhoe said yesterday.
--With assistance from Jesse Riseborough in London. Editors: Steven Frank, Simon Casey
To contact the reporter on this story: Christopher Donville in Vancouver at cjdonville@bloomberg.net
To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net
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