Rio Tinto announced a $2.5 billion share buyback today, following the sale of its subsidiary Coal & Allied.
Rio said that it would be returning part of the proceeds of the sale — a $2.45 billion all-cash deal — back to shareholders by way of a $700 million off-market buyback.
In an off-market buyback, eligible shareholders are invited to submit a portion of their shares for sale at a premium to the market price.
The balance of $1.9 billion will be purchased as part of Rio’s continuing on-market buy back program.
That will bring the total amount of buybacks in 2017 to $4.5 billion, following two other on-market buybacks this year — $500 million in February and $1 billion in August.
Rio intends to complete the $700 million off-market component by the end of this year. The on-market buyback of the remaining $1.9 billion will start in late December, to be completed by the end of next year.
“Returning the $2.5 billion proceeds from our Coal & Allied divestment shows our continued commitment to delivering superior value and returning cash to our shareholders,” CEO J.S Jacques said in a statement to the ASX.
“This year we have announced cash returns to shareholders of $8.2 billion, comprising $4.2 billion of dividends and $4 billion of share buybacks. Shareholder returns of this scale are made possible by maintaining the strongest balance sheet in the sector and a disciplined capital allocation process.”
Today’s announcement marks a quick return of cash to shareholders, as the sale of Coal & Allied was only completed three weeks ago.
The last day that shares can be purchased in order to be eligible for participation in the off-market buyback is September 26. The tender period will run from 11 October to 10 November.
Rio Tinto shares rose by as much as 1.55% following the announcement, and a short time ago were up by 1.12% in mid-afternoon trade.