TRQ:CC - Turquoise Hill holder Pentwater says it doesn't support the planned Rio Tinto deal (update)

Update 3:15pm: Adds analyst, Rio Tinto comment and background.

Turquoise Hill Resources ( NYSE: TRQ ) holder Pentwater Capital said it doesn't support Rio Tinto's C$43/share planned acquisition of the miner and that it  "significantly undervalues" the common shares. TRQ fell 2.4%, while RIO gained 4.7%.

Pentwater is evaluating its legal alternatives with respect of Turquoise Hill, Rio Tinto, and the proposed plan of arrangement, including but not limited to the possible exercise of Dissent Rights or other legal action, according to a statement. Pentwater Funds now own 23.5 million shares of TRQ, or 11.67% stake in the miner. Pentwater is the second largest holder after Rio Tinto, which already owns more than 50% of TRQ.

"Pentwater further believes that the proposed premium is unacceptable for a mine that Pentwater expects to be the third largest copper and gold mine in the world with a mine life in excess of 90 years," the investor said in a statement.

Pentwater said in its statement that it doesn't support the C$43 offer, though the investor didn't say it plans to vote against the deal.

The Pentwater comments come after Turquoise ( TRQ ) holder SailingStone Capital last Thursday said it doesn't support Rio Tinto's ( NYSE: RIO ) C$43/share for the company. SailingStone has a 2.1% stake in TRQ and publicly came out against Rio Tinto's ( RIO ) original bid in March. Pentwater and SailingStone said in March that Rio's original offer for C$34/share was too low.

Rio Tinto CEO Jakob Stausholm said in a statement on Monday when TRQ agreed to the revised bid t hat there would be no further price increases.

" After extensive negotiations, the terms of the transaction are final and there will be no further price increase," Stausholm said in the statement.

Last Thursday Canaccord said Rio's increased TRQ offer was likely to win shareholder approval and Jefferies agreed.

"We assume the Special Committee and the minority shareholders are on the same page, so we do expect this deal to close," Jefferies analyst Christopher LaFemina wrote in a note last Thursday.

Bank of America also argued that the price for TRQ appeared to be fair.

"Rio is clearly paying a significant (67%) premium to acquire the remaining 49% of TRQ and increase its interest in Oyu Tolgoi  from 34% to 66% given copper prices have declined by 23% since the initial offer on 11 March 2022," BofA analyst Jason Fairclough wrote in a note last Thursday.

Rio Tinto last Thursday said it doesn't plan to make a hostile takeover offer for Turquoise ( TRQ ) if shareholders reject the company's revised C$43/share bid.

"The improved offer from RIO has secured all-important unanimous support from the independent Special Committee of TRQ’s Board of Director," Macquarie analyst Hayden Bairstow wrote in a note on Tuesday. "The cash offer values the minority interest at US$3.3b and is at a 30% premium to our NPV, which we view as appropriate."

Rio Tinto has "broad support" from Turquoise Hill shareholders, Bold Baatar, CEO of Rio Tinto Copper told Seeking Alpha in an interview last Thursday.

Baatar explained that Turquoise Hill ( TRQ ) holders are taking a risk by not accepting the offer as "there could be very significant" dilution if the offer goes away and equity raise has to occur.

Also see, Rio Tinto must face Pentwater lawsuit in U.S. over Mongolia mine cost overruns.

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