Rio Tinto’s largest London-based institutional shareholder has expressed concern about the proposed $US19.5 billion deal with Chinese state-owned aluminum group Chinalco.
And media reports also said other big shareholders based in the UK were also opposed to the deal.
The shareholders, who claim to be determined to block Rio’s deal, say they will back a a rights issue if the terms are right and would encourage a new bid, perhaps from BHP Billiton.
Legal & General, the second largest investor after Chinalco itself, said it had outlined its concerns at a meeting with the mining giant’s management.
Legal & General issued a statement in London on Friday saying "We expressed our view that shareholder pre-emption rights are paramount. We look forward to engaging further with the company to achieve an outcome acceptable to all shareholders".
Rio’s deal to raise $US7.2 billion through a convertible bond issued to Chinalco, while also selling assets to the Chinese state-owned metals group to raise a further $US12.3 billion, has angered many investors.
Chinalco has no money: it is getting its finance from the state-owned China Development Bank. It paid $US1 billion on Friday to Alcoa for its interest in the Rio stake the two bought last year. That was equal to three times the current Rio price, so Chinalco has shown that money is no object.
The way it is being financed reveals that it is nothing more than the conduit for the deal that is supported at the top of the Chinese government.
Rio has angered investors by claiming that the Chinese deal was the only one available, without exposing itself to questioning on any new advance from BHP, any approaches from Mitsui, or other possible buyers.
The other major option for Rio was to raise money from shareholders (up to $US10 billion in the cash issue, which would have taken care of this year’s debt repayment and possibly allowed a revamp of the overall debt package).
The London Sunday Telegraph quoted Evy Hambro, a managing director of investment group, BlackRock, as saying:
"If we were given the chance to support a recapitalisation of the company we would have done so subject to terms. In addition we believe it is fairer to give all shareholders a chance to support the company rather than just one shareholder. This deal does not meet with this key principle of treating all shareholders equally. Both the board and management must have had an exceptional reason for treating this shareholder more equally than others.”
Legal & General, part of the Legal and General Group Plc owns more than 50 million shares, or just over 5% of the miner’s London-based shares.
The Telegraph also said that The Scottish Widows Investment Partnership, which owns 1.3% of Rio’s shares, has also expressed disappointment in the deal.
AMP Ltd says 2008 profit fell 41% to around $580 million as the stockmarket slump and increased volatility in financial markets took their toll.
The group updated guidance in a statement on Friday, ahead of the release of full year figures this Thursday.
The company said net earnings fell $580 million from $985 million a year ago.
It posted investment losses of $260 million and cut its final dividend to 16c a share to save cash. That makes the full year payment, 38c a share, equal to a payout of 90%. This doesn’t include the special 2c a share payment earlier in the year from the Gordian/Cobalt deal.
AMP said "it expects its 2008 underlying profit to be around A$800 million (FY 07 A$882 million), which is in line with market expectations".
(Underlying profit is AMP’s key measure of business profitability as it removes investment market volatility and is the earnings base from which the board’s decisions relating to dividends are derived.)
CEO, Craig Dunn said AMP was providing early guidance on the likely dividend declaration because current market expectations were tracking higher than the expected outcome.
"When setting the dividend, as well as considering our dividend payout policy and expected future underlying profits, in these markets the Board also takes into account current cash earnings and the need to preserve capital and maintain AMP’s balance sheet strength.
"We understand the impact a lower than expected dividend has on our large shareholder base, particularly when times are tough. But as a Board we recognise the need to make some tough calls in the short term to ensure the best long term outcomes for the company and our shareholders.
"In the current challenging environment, maintaining our balance sheet strength is a key priority and is in the best long term interests of our shareholders."
AMP said it remains strongly capitalised, with excess capital above minimum regulatory requirements at December 31 expected to be higher than both the pro forma guidance provided at the time of AMP’s capital raising in November and the position at 30 June 2008.
"AMP remains a financially strong company, with a robust balance sheet, low gearing and high interest cover," Mr Dunn said.
AMP’s statutory profit is expected to be around A$580 million (FY 07 A$985 million including A$171 million from Cobalt/Gordian, sold in 2007). This includes an expected investment income market adjustment loss of around A$260 million. The estimated statutory profit also includes an annuity fair value loss which is offset by accounting mismatches and other adjustments.
AMP also reported on its fourth quarter cashflows: total net cashflows in AMP Financial Services (AFS) for the three months to 31 December 2008 were A$252 million, compared with A$524 million in the fourth quarter of 2007. The fall reflected much lower discretionary superannuation contrib
