Rio Tinto increases Riversdale offer

Rio Tinto has increased its offer to for coal producer Riversdale Mining, in an effort to avoid a shareholder standoff.

Rio’s offer has increased by 3 per cent to $AU16.50 per share.

Riversdale says it intends to sell $2 billion worth of bonds to US investors to finance two coal projects in Africa in case opposition from shareholders causes the offer to fail.

The offer period for Rio will run until 1 April and if there are no other bids, the company will not increase its offer, which valued the company at $3.9 billion.

The initial bid of $15 a share by Rio in December was increased to $16 the same month and Doug Ritchie, chief executive of Rio Tinto Energy said the latest increase should be welcome news for shareholders.

“The increase in the offer price from $16.00 to $16.50 gives Riversdale shareholders a highly attractive premium and now is the time for them to accept our recommended bid,” he said in a statement.

Ritchie reminded investors that Rio’s offer was the only one Riversdale had received and if it was rejected its share price would probably slump back to where it was prior to Rio’s first bid.

“There is no question that Rio Tinto’s expertise is crucial to overcoming the development challenges of Riversdale’s projects,” he said.

There is speculation the two majority shareholders, India’s Tata Steel and Brazil’s Companhia Siderúrgica Nacional could be holding out for a better offer.

Tata Steel owns about a quarter of the company, and Companhia Siderúrgica Nacional is close behind with close to 20 per cent.

Because the two companies combined still own less than half the company, it is possible for Rio to win without their support, but it would be a difficult task.

Rio raised its stake in Riversdale by 17 per cent last week.

Rio Tinto is particularly interested in the two major coal projects in South Africa’s Mozambique owned by Riversdale, which represent over 13 million tonnes of coal resources.

“Zambeze is the world’s largest single coking coal resource as far as we can see,” Steve Mallyon, Riversdale Managing Director told Bloomberg.

“Markets are always ready for a world-class project.”

Image: Riversdale Minign 2011
 

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