Rio Tinto Wins Riversdale Endorsement for Improved $3.9 Billion Bid

Strategic Insights -

Australian mining giant Rio Tinto Ltd. (RIO.AU) has received the endorsement of Riversdale Mining Ltd.'s (RIV.AU) board for an improved A$3.9 billion takeover bid for the Mozambique-focused coal miner. However, analysts say Rio Tinto may need to sweeten its offer to win over major shareholders, including India's Tata Steel Ltd. and Brazil's Cia. Siderurgica Nacional (SID).

Key Takeaways:

  • Rio Tinto's improved bid for Riversdale is A$3.9 billion, with a cash offer of A$16 per share, compared to the original indicative offer of A$15.
  • The bid requires a minimum acceptance of 50% and has already attracted pre-bid acceptances from 14.9% of Riversdale's shareholders.
  • Major shareholders, including Tata Steel and CSN, own 24% and 13% of Riversdale's shares, respectively, and may require a higher bid price to secure their support.
  • Analysts value Riversdale's assets at A$17 to A$18 per share based on the quality of its coal resources alone, suggesting a bidding war is possible.
  • The takeover bid involves Riversdale's Benga and Zambeze projects in Mozambique, which hold 13 billion tons of coking and thermal coal resources.

Statistics:

  • Rio Tinto's improved bid is worth A$3.9 billion.
  • The bid price is A$16 per share, up from A$15.
  • 14.9% of Riversdale's shareholders have pre-bid accepted the offer.
  • Major shareholders, including Tata Steel and CSN, own 37% of Riversdale's shares combined.
  • Riversdale has 13 billion tons of coking and thermal coal resources in their Benga and Zambeze projects.

Sources:

  • [Dow Jones Commodities News via Comtex, Dec 22, 2010]
  • [Ross Kelly, Dow Jones Newswires; 61-2-8272-4692; ross.kelly@dowjones.com]
  • [Rio Tinto Ltd. (RIO.AU)]
  • [Riversdale Mining Ltd. (RIV.AU)]
  • [Tata Steel Ltd. (500470.BY)]
  • [Cia. Siderurgica Nacional (SID)]