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Posts Tagged ‘Riversdale’

Rio Tinto Assumes Control of Riversdale

April 12, 2011 Comments off

“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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Rio Tinto still not in control of Riversdale

March 29, 2011 Comments off

“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

Rio Tinto in final push to win Riversdale

March 14, 2011 Comments off

“Rio Tinto has sweetened its bid for Riversdale Mining to just over A$4bn ($4bn) in a final attempt to secure a minimum 50.1 per cent stake in the Australia-listed group that is developing coal deposits in Mozambique. Rio already controls 18 per cent of its target’s shares and is confident its latest offer, which it said is its last, barring a rival proposal, would see it become Riversdale’s dominant shareholder ahead of Brazil’s CSN, which has a 19 per cent stake, and India’s Tata Steel on 27 per cent.

However, for Rio to reach its 50.1 per cent threshold, it needs the backing of either Tata or CSN. The two have each lifted their stakes in Riversdale in recent weeks to strengthen their bargaining positions. Rio on Thursday revealed a cash offer of A$16.50 a share, up from A$16 previously, provided it reached 50.1 per cent acceptance by March 23. The revised offer, which has been extended by two weeks to April 1, is a 3 per cent increase from the previous bid.”

Source: Financial Times, March 10 2011

Observations:

  • First shipments of coking coal from Mozambique are expected this year. Tata has signed contracts to receive 40% of the output of Riversdale mines.
  • Rio Tinto announced today it has increased its stake in Riversdale to 26.1%. CSN and Tata together hold 47% of the shares, but some institutional investors are waiting with committing to sell their shares to Rio Tinto as they want more clarity on CSN’s and Tata’s intentions.

Implications:

  • The Indian coal consortium led by ICVL that was supposedly pressured by Indian government to consider bidding for Riversdale appears not to emerge as a rival bidder to Rio Tinto. As a result Rio Tinto will succeed in gaining the majority of the shares by buying out either CSN or Tata Steel or convincing almost all minority shareholders to sell their shares.
  • The deadline for the offer is April 1st. Rio Tinto faces the problem that it cannot discriminate in the price it is willing to pay for Riversdale’s shares in order to acquire 50.1%. If the company does not succeed in convincing the remaining shareholders with the current $16.5/share offer, it will either have to back off or increase its offer for all of the outstanding shares. If CSN or Tata then agrees to sell the companies will be paying a high premium and ending up with much more than a small majority of shares.

©2011 | Wilfred Visser | thebusinessofmining.com

Riversdale Directors Back Rio Tinto Offer

January 24, 2011 Comments off

“Rio Tinto PLC’s 3.9 billion Australia dollar ($3.8 billion) takeover of Riversdale Mining Ltd. received a boost Monday when the last holdout on the coking coal miner’s board recommended the deal along with its other directors.

NK Misra, a Tata Steel Ltd. appointee to Riversdale’s board thanks to the Indian company’s 24.2% stake in the miner, backed Rio’s offer signalling that the steel producer may not seek to block Rio’s buyout with its own bid to take control of the miner, according to a statement.”

Source: Wall Street Journal, January 24 2011

Observations:

  • Rio Tinto’s bid was unconditionally approved by the Australian Treasurer last Friday, enabling it to quickly close the deal. To convince the shareholders the opinion of Riversdale’s board was crucial.
  • ICVL is reported to meet with a consortium of Indian coal producers on Thursday to discuss a counterbid. This gives the Indians 3 weeks before the closure of Rio Tinto’s bid to convince the shareholders they can offer a higher price.

Implications:

  • ICVL’s chairman has started the verbal bidding war already, by announcing in an interview that the consortium will offer a higher price than offered by Rio Tinto. However, it is hard to find more synergies with the Indian companies than with Rio Tinto. A high Indian offer for Riversdale would purely be a strategic move in order to gain production market share, which could lead to further opportunities in the future.
  • The role of Tata in the acquisition is not fully clear. The company holds 24% of Riversdale’s shares and says it is not opposed to the acquisition. However, the advice by the board member appointed by Tata is explicitly said not to be Tata’s opinion. Tata could surprise Rio Tinto by siding with the Indian consortium, thus gaining goodwill from the Indian government.

©2011 | Wilfred Visser | thebusinessofmining.com

Riversdale: Scramble in Africa

January 3, 2011 Comments off

“Rio Tinto, one of the world’s biggest mining companies, has certainly seen something it fancies in Riversdale, an Australia-based firm that operates mines in Mozambique which produce both coking and thermal coal. Two days before Christmas Rio bumped up its offer for the firm to $3.9 billion. The bid says much about Rio’s ambitions and the battle that giant mining firms will face in getting their hands on the world’s mineral resources. …

Not all miners reckon that attempting mammoth mergers is the best use of their bulging wallets. Yet the remaining option of pursuing smaller, bolt-on acquisitions comes with problems too. Firms of the size of Riversdale are small enough for any number of potential bidders to be able to contemplate buying them.”

Source: The Economist, December 28 2010

Observations:

  • The Economist notices the risk of overpaying for ‘small’ acquisitions like Riversdale as many potential bidders can start a bidding war for the target.
  • A government backed Indian consortium, Vale, NMDC and Tata (a current shareholder) might emerge as competing bidders for Riversdale. A combined effort in which the Indians put in part of the >$1bln required infrastructure investment and obtain long term contracts to buy the coal might be drafted.

Implications:

  • Rio Tinto’s strategy in the coal business is to secure a portfolio of world class assets (large, long life, low cost). It recently divested its share in American Cloud Peak Energy and Jacobs Ranch, trying to invest in larger assets that are closer to the Asian growth markets. If the investments in Oyu Tolgoi’s Copper asset in Mongolia prove successful, the company might consider buying into the nearby Tavan Tolgoi Coal asset.
  • In the aftermath of Cancun’s climate discussions the debate over the mining industry’s role in reducing carbon emissions is heating up. Should miners play an active role in reducing coal supply or is the miner’s only task to supply the natural resources the downstream industry needs?

©2011 | Wilfred Visser | thebusinessofmining.com

India Coal JV May Bid for Riversdale Mining

December 15, 2010 Comments off

“India’s steel ministry asked a joint venture of five state-run companies to consider bidding for Riversdale Mining Ltd., in what could further intensify a battle for the Australian coal miner.

Acquiring Riversdale, which has 13 billion tons in coking and thermal coal reserves in its Benga and Zambeze projects in the southern African country of Mozambique, will help the Indian companies secure coal supplies to power an expanding economy. Riversdale said earlier this month it is in talks with Rio Tinto PLC about a 3.55 billion Australian-dollar ($3.53 billion) takeover, but Rio Tinto has yet to submit a formal offer.”

Source: Wall Street Journal, December 14 2010

Observations:

  • Riversdale, listed on the Australian Stock Exchange, is active in coal mining in South Africa and Mozambique. Earlier this month plans of Rio Tinto to offer a small premium for Riversdale become public, while rumors exist that Vale, Tata and NMDC would be interested in acquiring the assets in Mozambique.
  • The Indian coal mining companies that might get involved in bidding for the assets are Coal India, International Coal Ventures Ltd. (ICVL), NTPC, NMDC, Rashtriya Ispat Nigam and Tata, which owns a strategic stake in Riversdale already.

Implications:

  • A joint bid of state controlled companies from India would be one of the first signs of the Indian government pursuing the same strategy as China in securing access to resources abroad. Like China, India has a strong domestic coals supply which is not able to keep up with growing demand.
  • A number of large resources companies have grown in India; Tata Steel, ArcelorMittal, Reliance & Vedanta being the most well-known. However, most of these companies are not state controlled and have positioned their official headquarters in Europe. With the IPO of Coal India and consolidation of other companies the Indian domestic industry gets ready to become active internationally.

©2010 | Wilfred Visser | thebusinessofmining.com