Rio Tinto passes target for £2 billion Riversdale takeover
Mining giant secures 49.49 percent support
By CFOWorld.co.uk | CFO UK | Published 12:40, 06 April 11
Rio Tinto is close to taking control of Riversdale Mining after receiving renewed acceptance of its proposed A$3.9 billion (£2 billion) takeover bid.
The company said it would proceed with its plan if it achieved its 47 percent target but that figure has been surpassed and the price on the deal increased.
An extra 50 cents per share will now be paid because Rio improved on its target acceptance level by April 6th, the date set as a deadline for such a rise.
Rio's offer, announced in December, was originally conditional on at least 50 percent acceptances, but it was forced to revise that plan last week after Riversdale's other two top shareholders, Brazilian steel CSN and Tata Steel, declined to sell.
CSN, Brazil's biggest steel maker, has said it has no immediate plans to sell its stake in Riversdale because it sees the asset as “strategic” -- selling the holding would lessen its bargaining power to control coal supplies.
CSN owns 19.9 percent of Riversdale, while Tata, the world's seventh-largest steelmaker, recently increased its stake in the Australian-listed company to 27 percent.
Rio has targeted Riversdale because of its hard coking coal projects in Mozambique, which could eventually supply as much as a tenth of the global market for the key steel-making ingredient.
The bid fits with Rio's strategy of developing large, long-life, low-cost assets, as China and India fuel demand for African coking coal. Reconstruction activities in Japan are likely to increase demand still further.
But the tussle for Riversdale has shown that even miners targeting smaller, bolt-on acquisitions to make use of their cash piles can encounter problems in deals that pit producers against commodity consumers as prices rise.
Coal prices have seen sharp spikes since December in response to floods in Australia, Japan's disaster and Germany's decision to shut 7 megawatts of nuclear power.
Earlier on Wednesday Rio announced a 46.78 percent holding. It had been expected to hit its 47 percent target with the help of passive index funds, who sold their shares into the offer.
The offer price increase from $16 to $16.50 per share also triggered an extension of the offer period until April 20th.
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