Rio offers $3,9bn for Riversdale

Rio Tinto has offered $3,9-billion to buy Australian-listed coal miner Riversdale in an agreed deal to give the Anglo-Australian mining giant access to African coking coal deposits as demand for the commodity from Asia soars.

Rio raised its offer to Aus$16 per share cash but Riversdale shares rose as high as Aus$16,84 when the stock resumed trading, indicating investors were expecting a higher offer from a rival party.

A group of state-run Indian firms has said it is looking at Riversdale, while sources familiar with the matter have said other interested parties include Anglo American, ArcelorMittal and Xstrata.

“I think there is a strong potential [for rival bids]. There aren’t that many big new coking coal assets out there and this one is very large and it’s near to production,” said Andrew Harrington, an analyst at Patersons Securities in Sydney.

A deal would be Rio’s first major acquisition since it bought Canadian aluminium maker Alcan in 2007.

The miner needs acceptances from 50% of Riversdale shareholders, which would require getting on board at least one of the target’s big shareholders—India’s Tata Steel, Brazilian steel group CSN and US fund Passport Capital, which together own about half of the company, according to Reuters data.

“I think Tata will be reluctant to be bought out, having been a long-term believer, just as it’s entering into production,” Patersons’s Harrington said.

Rio said it had also entered into pre-bid agreements to buy 14,9% of Riversdale shares, including from Riversdale’s executive chairperson and founder Michael O’Keefe and managing director Steve Mallyon.

Riversdale owns valuable coking coal assets in Mozambique, which Rio said was in line with its strategy of developing large, long-life, low cost assets.—Reuters