Yancoal Australia Ltd (ASX:YAL) entered into a binding agreement to acquire Coal & Allied Industries Ltd. from Rio Tinto Group (LSE:RIO) for $2.5 billion on January 24, 2017. Under the terms of the agreement, Yancoal Australia Ltd will pay the cash consideration of $2 billion and $500 million in aggregate deferred cash payments, payable as annual installments of $100 million over five years following completion. As per the amended terms on June 20, 2017, Yancoal Australia Ltd and Yancoal Australia Ltd entered into an amendment deed to the sale and purchase agreement. Pursuant to the amendment deed, the sale and purchase agreement is amended to the effect that the deferred payment amounts of total $500 million will be paid at the Completion, which increases the total amount payable by Yancoal Australia Ltd at the completion to $2.45 billion. Yancoal Australia Ltd intends to fund the acquisition via a capital raising and pro-rata entitlement offer of ordinary shares. Yanzhou Coal Mining Company Limited announced that it intends to subscribe for around $1 billion of Yancoal Australia Limited's entitlement offer. Yanzhou Coal Mining Company Limited raised CNY 7 billion (AUD 1.3 billion) through a non-public offering of 647 million shares to fund the acquisition. On June 26, 2017, Yancoal Australia Ltd made an amendment in sale and purchase agreement to acquire Coal & Allied Industries Ltd. from Rio Tinto for $2.7 billion. Under the terms, Yancoal Australia Limited will pay $2.5 billion in cash on completion and $240 million as non-contingent royalty payable over five years. Yankuang will now provide a $125 million bank guarantee towards the deposit arrangements, in addition to the $100 million deposit that it has already agreed to provide. As on August 1, 2017, Yancoal Australia Ltd announced equity raising through a 23.6 for 1 renounceable entitlement offer at $0.10 per share to raise up to approximately $2.4 billion and released an offer document for the entitlement offer, in conjunction with a placement to strategic investors at the same price to raise approximately $150 million to provide funding for the transaction. Yancoal Australia Ltd will pay a termination fee of $23.5 million (AUD 31.4 million) to Rio Tinto if the transaction is terminated.

The transaction is subject to a number of closing conditions, including Yancoal Australia to undergo debt restructuring, Rio Tinto plc and Rio Tinto's shareholders' approval, Yanzhou Coal Mining Company Limited's shareholders' approval and approvals from the Australian Government, Chinese regulatory agencies and the NSW Government, and consummation of due diligence. The general meeting of Rio Tinto plc will take place on June 27, 2017 and the general meeting of Rio Tinto Limited will take place on June 29, 2017 for the approval of Rio Tinto shareholders. As on March 31, 2017, the Board of Directors of Yanzhou Coal Mining Company Limited, the parent of Yancoal Australia Ltd, approved the issuance of shares to specific persons to use its proceeds for acquisition. As on April 13, 2017, Yancoal Australia Ltd has received confirmation from Foreign Investment Review Board that the Commonwealth has no objection to Yancoal Australia Ltd acquiring Coal & Allied Industries. As of June 29, 2017, shareholders' of Rio Tinto approved the transaction. As of May 21, 2017, the Board of Directors of Rio Tinto Limited unanimously recommended the shareholders to vote in favor of transaction. On June 26, 2017, the transaction was approved by New South Wales Government. Yancoal Australia Ltd agreed to waive its right to terminate sale and purchase agreement in case of material adverse change, the condition precedent of approval from the Minister responsible for the Mining Act 1992 (NSW) shall be waived; and the condition precedent of PRC outbound investment approval from the State Administration of Foreign Exchange of the PRC shall be waived if such is not obtained on or before July 3, 2017. As on August 9, 2017, Yancoal Australia Ltd submitted application to takeover panel of Australia. On, August 25, 2017, the shareholders of Yanzhou Coal Mining Company Limited, parent of Yancoal Australia approved the transaction.

Yancoal's Board of Directors appointed an independent Board committee comprising Gregory Fletcher, Geoff Raby, Vince O'Rourke and Joe Zhang to consider and take actions in relation to the funding required for the transaction. The transaction is expected to complete in the third quarter of 2017. Rio Tinto will use the consideration received for general corporate purposes. In the near term, completion of the transaction will reduce the net indebtedness of Rio Tinto. Completion of the transaction is not expected to have a material impact on Rio Tinto's earnings per share.

J.P. Morgan Australia Limited, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. and China International Capital Corporation Limited (SEHK:3908) acted as financial advisors for Yancoal Australia Ltd and Deloitte Corporate Finance Pty Limited acted as financial advisor for the independent Board committee of Yancoal Australia Ltd. Philippa Stone, Adam Strauss, David Ryan, Marcus Berghouse, Shaun Williamson and Laura Stuckey of Herbert Smith Freehills and Sophie Chen, Daniel Scotti, Brendan Clark of MinterEllison acted as legal advisors for Yancoal Australia Ltd. and Gilbert + Tobin acted as legal advisor for the independent Board committee of Yancoal Australia Ltd. Baker & McKenzie and Han Jie, Tang Lizi, David Friedlander, Esther Hao, Jingchuan Zhao, Robert Kelly and Anthony Hong of King & Wood Mallesons acted as a financial advisors and Richard Malcolmson, Richard Kriedemann, Ted Hill, Malcolm Stephens, Michael Ilott, Glenys Hodges, Andrew Wong, Steven Local, Tracey Davern, Sophie Matthiesson, Melanie Hayden, Maggie Shelton, Isabel Burraston, Pavel Zorin and Richard Tomat of Allens acted as a legal advisor to Rio Tinto. Ernst & Young Transaction Advisory Services Limited acted as fairness opinion provider to Rio Tinto Limited and paid advisory fee of $0.14 million (AUD 0.2 million). The Goldman Sachs acted as financial advisor for Yancoal Australia.