Home > Mergers & Acquisitions > Rio Tinto still not in control of Riversdale

Rio Tinto still not in control of Riversdale

March 29, 2011

“Rio Tinto PLC failed to reach the majority stake it was chasing in Riversdale Mining Ltd., but said Tuesday the takeover offer remains open and it will accept a position as the largest shareholder accepting that may mean it won’t be able to push through its plans for the Africa-focused coal company.

The bid, which values all of Riversdale at almost US$4 billion, was declared unconditional and the offer price set at AU$16.50 a share provided Rio secures a more than 47% interest in Sydney-based Riversdale by April 6. Rio’s effective interest had risen to 41.04%, short of the more than 50% threshold previously set for the offer by a Monday deadline.”

Source: Wall Street Journal, March 29 2011

Observations:

  • Where the company previously aimed for 50.1% of the shares, it is now said to be satisfied with 47%, which would give it a larger share than the other two major shareholders (Tata Steel and CSN) combined.
  • The new offer is made unconditional in order to enable various institutional investors that were not allowed to sell under conditions.

Implications:

  • Rio Tinto will not be able to pursue the same strategy to gain control it used for the Oyu Tolgoi deposit, where it slowly grew its ownership stake in project owner Ivanhoe Mines. CSN and Tata Steel are both to large and not complementary for Rio Tinto to try to control them.
  • It is still very likely that either Tata Steel or CSN will sell at least part of their shares in exchange for long term supply commitments by Rio Tinto. Both companies have build up their stakes in the past months to gain a better negotiation position.

©2011 | Wilfred Visser | thebusinessofmining.com

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