Home > Mergers & Acquisitions > Rio Tinto Assumes Control of Riversdale

Rio Tinto Assumes Control of Riversdale

April 12, 2011

“Rio Tinto said Friday it has assumed control of Riversdale Mining Ltd., as its interest in the Africa-focused coal producer rose above 50%, and could increase further before the takeover offer closes April 20. Riversdale has already appointed three Rio Tinto nominees to its board, including energy division Chief Executive Doug Ritchie, and Rio Tinto said other appointments are expected to follow.

‘The new Riversdale board will reflect our majority shareholding and help clear the way for the development of Riversdale’s assets as quickly as possible,’ Mr. Ritchie said in a statement.”

Source: Wall Street Journal, April 8 2011

Observations:

  • Rio Tinto managed to secure control of Riversdale in about 4 months time, the first approaches made in December. For some time an Indian state-backed coal consortium was looking at making a bid, but no competing bids were ever made.
  • The offer deadline at A$16.50 per share is extended to April 20th. Any shareholder that did not yet commit shares can decide to sell at this price up to next Wednesday. As a result Rio Tinto will end up with slightly more than 50% of the shares.

Implications:

  • The resulting shareholder structure is not unfavorable to Rio Tinto. It has full control over the assets, but at the same time can count on support from Tata for supply agreements. In the current configuration only CSN might not be very satisfied with the change of control. Time will teach whether or not CSN management will try to sell the stake.
  • In earlier stages Rio Tinto was reported to want to replace Riversdale’s management. Most likely the appointment of several directors is used as a means to get full understanding of the company, after which management changes will be made.

©2011 | Wilfred Visser | thebusinessofmining.com

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