Some of the motivating factors behind the buyback

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Reference no: EM131575836

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?

Reference no: EM131575836

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