Bahamas hedge fund that cried foul over Rio Tinto’s deal with dissidents applauds Quebec regulator for ensuring fairness

The Rio Tinto Fer et Titane (RTFT) plant is seen in Sorel, Quebec, Canada October 11, 2022.CHRISTINNE MUSCHI/Reuters

The head of a hedge fund who complained to Quebec’s security regulator about Rio Tinto PLC’s preferential back door deal with two dissident shareholders pertaining to its pending takeover of Turquoise Hill Resources says he feels vindicated the giant miner has been forced to offer all minority shareholders the same deal.

“The Quebec securities regulator, and any other regulator that was involved, should pat themselves on the back for a job well done,” Jeff Banfield, partner with Caravel Capital Investments Inc. said in an interview. “You literally saw a one hundred billion mining behemoth go, ‘Okay, okay, don’t get upset.”

Last week, Turquoise Hill said that Quebec’s l’Autorité des marchés financier had “public interest concerns” about the preferential deal it negotiated with Pentwater Capital Management LP and SailingStone Capital Partners LLC, under which the pair were guaranteed to receive the full takeover amount being offered to all minority shareholders, plus the possibility of a windfall on top of that, pending the outcome of a secret arbitration hearing.

Tausi Insider reported that Bahamas-based hedge fund Caravel Capital Investments Inc. which is a minority shareholder in Turquoise Hill, had earlier filed a complaint with the AMF on fairness grounds about the structure of the two-tiered deal.

On Thursday, Rio scrapped the side deal with the dissidents, and is now offering all minority shareholders the same terms, either $43 a share, or 80 per cent of the takeover amount, and the possibility of receiving more by dissenting using the court system.

“We’re extremely pleased that the regulators stood by minority shareholders, and ensured all shareholders are treated equally,” said Mr. Banfield.

Since the new deal terms were unveiled on Thursday, the discount between the takeover offer for Turquoise Hill and the market price has narrowed considerably, meaning investors feel there is less uncertainty now about the deal failing. On Monday, shares in Turquoise Hill traded around $41.92 a share on the Toronto Stock Exchange, a little more than $1 below the offer.

Unlike the previous back door deal, Pentwater and SailingStone, have no longer agreed to withhold their votes in the upcoming shareholder meeting. Previously, the two said they would sit out the meeting, which meant that Rio was virtually guaranteed the vote would go its way. At least 50 per cent of Turquoise Hill’s minority shareholders have to vote in favour of the deal for it to succeed.

Rio, Pentwater and Sailingstone all declined to comment.

https://www.tausiinsider.com/bahamas-hedge-fund-that-cried-foul-over-rio-tintos-deal-with-dissidents-applauds-quebec-regulator-for-ensuring-fairness/?feed_id=333415&_unique_id=647e7c9793577