British mining giant Rio Tinto (RTP-N) hopes to take advantage of depressed market conditions by buying back 10% of its shares.
The move is intended to provide Rio with greater flexibility in managing its capital structure. “We consider that buying back shares, particularly in current market conditions, should achieve earnings-per-share improvement for the shareholders of both companies,” explains company chairman Robert Wilson.
On the New York Stock Exchange, American Depository Receipts (ADR) equivalent to four shares per receipt have traded between US$47 and US$52 each, down from the 12-month low of US$73 per ADR.
According to the company, which has an Australian-listed affiliate, the proposal was influenced by the announcement in Britain of the abolition of the Advance Corporation Tax, and by changes in corporate laws in Australia.
Should shareholders accept the plan, under which Australia’s Rio Tinto Limited and Britain’s Rio Tinto PLC could only repurchase their respective shares, the buyback could begin in late February or early March.
Currently, shareholders hold 51.2% of Rio Tinto Limited, with the remainder held by Rio Tinto PLC.
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