The Rio Tinto Limited (ASX: RIO) share price is climbing from the open today and is currently up 2.26% at $109.33.
Rio has been in the headlines lately regarding its proposed acquisition of Turquoise Hill. This would bring its stake in a Mongolian copper operation to 66%.
Unfortunately, the acquisition has had a mixed reaction from stakeholders, with some analysts and shareholders questioning the move, while others praised the outcome.
Now the deal has another hurdle to overcome with reports a key Turquoise Hill shareholder has scathed the proposal as being too cheap. Let's take a look.
Too cheap, shareholder says
One of Turquoise Hill's major investors, SailingStone Capital Partners, has voiced its concerns over the proposed deal, saying it is "highly opportunistic", according to reporting from The Australian.
The firm owns a 2.4% stake in Turquoise, and is reportedly unsatisfied with the deal's particulars, believing Rio has valued the company too low.
"An additional premium to compensate minority shareholders for losing access to an asset of this quality seems eminently reasonable," SailingStone reportedly said in an open letter to the company's management.
SailingStone reckons the mining giant can cough up way more than what it is offering – a C$32 per share deal to buy the remaining 49% it does not already own – due to its performance lately.
"This bid appears to be highly opportunistic, coming in the midst of an equity overhang caused by Rio's mismanagement of both the project and the partnership and just ahead of mine completion with the accompanying free cash flow that will benefit all stakeholders for decades into the future," SailingStone said.
"Furthermore, the commodity backdrop is as attractive as it has ever been, placing a premium on any long-lived, low-cost reserve base," it added.
Analysts at Barrenjoey Markets made note of Rio's potential discount in buying the asset, stating that "this seems like a good deal" on face value.
Morgan Stanley was also constructive and said the project has been de-risked after agreements with the Mongolian government, valuing Rio at $122.5 per share in the process.
Macquarie also reckons the deal should be a net positive for the Rio share price and rate it a buy alongside Credit Suisse and Goldman Sachs at valuations of $140, $130, and $131.50 per share respectively.
It remains to be seen what the next moves will be from either side. However, SailingStone has certainly made its points heard to the public.
Rio Tinto share price summary
In the last 12 months, the Rio Tinto share price has fallen more than 2% into the red. However, this year to date, it has regained strengths and is around 8% in the green.
As commodity prices start to soften Rio shares have also weakened lately and now trade 8% in the red over the past month.
