The Rio Tinto Limited (ASX: RIO) share price is in focus today after it submitted an improved proposal to the board of Turquoise Hill Resources (NYSE: TRQ) in its pursuit to acquire the company.
The terms of the new proposal value Turquoise Hill at approximately US$3.1 billion, 56% higher than Rio's original proposal from 11 March 2022.
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Rio Tinto share price on watch after updated bid
There's been an ongoing saga with Turquoise Hill and Rio Tinto. Firstly, Rio is already the 51% majority shareholder in Turquoise.
Should it successfully acquire all the share capital in Turquoise it doesn't already own, Rio would also be the 66% owner of the Oyu Tolgoi copper-gold project, located in Mongolia.
However last week, the Canadian miner rejected Rio's all-cash offer for US$2.7 billion that was first made in March.
Rio was notably "disappointed" by the decision, and has therefore sweetened the terms of the deal to compensate.
Not only that, when examining the deal's particulars in closer inspection, the odds may be stacked in Rio's favour.
Since Rio's first proposal, "the average share price performance of Turquoise Hill's peers has declined 35%" the release noted.
"Furthermore, Turquoise Hill has disclosed in its latest earnings results that it needs to raise equity proceeds of more than US$1 billion to address its current estimate of funding requirements," it added.
Speaking on the announcement, Rio Tinto CEO, Jakob Stausholm said the offer "provides full and fair value for Turquoise Hill shareholders" whilst offering the certainty of cash at a premium.
[The deal] is in the best interests of all stakeholders as we work to move the Oyu Tolgoi project forward. We will continue to take a disciplined approach to capital allocation and strongly encourage the Board of Turquoise Hill to engage constructively, and to support and recommend in favour of Rio Tinto's Improved Proposal.
Jakob Stausholm, Rio Tinto Chief Executive
The deal still requires majority support of Turquoise Hill shareholders.
Meanwhile, the Rio Tinto share price is down more than 12% in the past 12 months, or 3% down this year to date.
