Turquoise Hill Surges as Rio Strikes Deal With Takeover Critics

(Bloomberg) — Turquoise Hill Resources Ltd. shares rose after two major investors struck a deal with Rio Tinto Group that paves the way for the London-based mining giant to advance its $3.1 billion takeover.

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Shares of Turquoise Hill surged 6% to C$42.77 at 10 a.m. in Toronto, bringing it closer to Rio Tinto’s C$43-a-share offer for the Montreal-based mining company.

Rio Tinto said Tuesday afternoon that it struck a deal with Turquoise Hill shareholders critical of its offer. Pentwater Capital Management LP and SailingStone Capital Partners LLC agreed to withhold their votes in exchange for C$34.40 per share and they will enter into arbitration over a “remaining consideration” for their shares. Rio said its offer remains its best and final.

The two investors, which combined hold about 16% of Turquoise Hill’s outstanding stock, had publicly opposed Rio’s offer, arguing that it undervalued the company. Institutional Shareholder Services Inc. echoed that view, while advisory firm Glass Lewis & Co. recommended investors support the transaction in part due to “significant near-term financing risks” faced by Turquoise Hill.

Rio Tinto has sought the 49% of the Canadian miner it doesn’t already own, in a deal valued at about C$4.24 billion. At stake is Rio’s control of Mongolia’s massive Oyu Tolgoi project, which is expected to become the world’s fourth-largest copper mine.

Turquoise Hill rescheduled a shareholders’ meeting to vote on the takeover to Nov. 8 at the request of Rio Tinto.

The vote required two-thirds approval of all votes from Turquoise Hill shareholders, including Rio Tinto, and approval of a simple majority of votes from minority shareholders.

Turquoise Hill said in a Wednesday statement that Rio advised it on Oct. 30 of potential terms of an agreement with Pentwater and SailingStone, two days before a shareholder meeting in Montreal to vote on the transaction. Shareholders related to those firms hold about 32.6 million shares in Turquoise Hill, according to the statement.