In an announcement to the ASX on Tuesday, Rio Tinto (ASX:RIO) reported the completion of its $560m off-market buy-back plan. The buy-back price was $48.44 per share and came in at a discount of 14 per cent off of market price. A total of 11.6m shares were repurchased, totalling approximately 2.65 per cent of Rio Tinto Limit’s issued capital, which is approximately .63 per cent of Rio Tinto Group’s issued capital. This deal is part of the company’s proposed $US2bn capital return program. Due to oversubscription for the buy-back, a 91.02 per cent scale back of Tenders was required. Shareholders who tendered their shares at a 14 per cent tender discount to the market price or as a final price tender will have a Priority Allocation of 85 shares bought back before the scale is applied.
This offer was only made to Australian investors and will be paid in Australian dollars. Shares that have been tendered are expected to be released on the 7 April 2015. Tendered shares at the $39 share price will be treated as a fully franked dividend for Australian tax purposes. For capital gains tax, the capital proceeds are estimated at $16.78, $9.44 for capital components plus $7.34 per share, which is the amount that the tax value exceeds the buy-back price. Shares of Rio Tinto are up 92c, or 1.65 per cent, at $56.70 per share around 1pm on Tuesday. Like many mining and commodity companies, shares of RIO are down for the year. RIO is down 11.27 per cent in the last 12 months and is down 2.17 per cent so far this year.