MARK BENDEICH, London | Monday.
The world’s third-biggest iron ore producer, Rio Tinto, triumphed in a bidding war for the number four, Australia’s North Ltd , but this has set the scene for a wider battle with iron ore consumers.
Rio emerged victor when its only rival bidder, London-listed Anglo American, threw in the towel, saying Rio’s last cash offer of A$3.5 billion, or A$4.75 per North share, could not be topped without destroying value for Anglo shareholders.
”We have moved where we could in terms of entering into the iron ore market but at the end of the day we were not prepared to overpay,” Anglo spokesman Nick von Schirnding said.
Anglo shareholders breathed a sigh of relief, pushing the stock up two percent to 32.30. Rio shares were up 1.35 percent at 10.52 each, but some North shareholders will suffer when the stock resumes trading this week as investors bought up the shares in anticipation that Anglo would play its trump card.
Anglo’s retreat will also disappoint its chief backers — three major Japanese steelmakers which had been determined to avoid the creation of a new producing powerhouse able to drive a harder bargain at the iron ore negotiating table.
Mitsui & Co, Nippon Steel and Sumitomo Metal had agreed to bankroll Anglo’s bid after Rio first opened the bidding for North in June.
With North under its belt, Rio would leapfrog Australia’s The Broken Hill Pty Co Ltd as the world’s second largest iron ore producer behind the clear leader, Companhia Vale do Rio Doce (CVRD) of Brazil, while the number of big Australian suppliers would shrink to two from three — an alarming prospect to Japanese steelmakers which have relied principally on Australian iron ore and coal supplies since the end of World War Two.
The Japanese traditionally play one Australian producer off against the other in a policy of divide and rule which has for decades helped to ensure over-supply in the iron ore market. – Reuters