On 12 February 2015 – the large materials company Rio Tinto Ltd announced its intention to undertake a significant off-market share buyback via a series of media releases to the market – as documented in the company announcements section of the ASX website [the ASX ticker code for Rio Tinto is “RIO”].
You will need to review the following two specific company announcements by RIO in order to complete the tasks associated with this question:
1. “Rio Tinto Limited off-market buy-back tender” dated 25 February 2015
2. “Successful completion of A$560 million off-market buy-back” dated 7 April 2015
(a) How much was RIO initially intending to buy back?
(b) What do you think were some of the motivating factors behind the buyback? [For example; Section 3.10 of the February announcement provides some insight into management thinking]
(c) According to the February announcement (looking at section 3) – what impact would the buyback have on both the earnings per share for the company as well as the company’s leverage?
(d) According to the February announcement – what was the capital component buyback price and how would the rest of the payment be treated?
(e) According to the February announcement – there were two decisions that RIO shareholders had to make if they wanted to participate in the buyback. What were these two decisions? [Tip: look at the tender form contained in section 6 of the announcement]
(f) According to the April announcement – how much was bought back, what were the final terms of the buyback and were all shareholders able to sell as many shares as they wanted into the buyback?