Global miner Rio Tinto yesterday tried to negotiate with one of two major shareholders in Riversdale Mining to try and save its near $4 billion offer to secure a majority stake in the Africa-focused miner.
But the talks failed, so the company was forced to go unconditional and low the acceptance level to 47%, where it might have a chance of grabbing the biggest share holding.
Rio Tinto had launched a $3.9 billion, sweetened takeover bid for Riversdale, conditional on at least 50% acceptances, but has so far secured only about 41%.
Rio Tinto’s lawyer said in a letter released to the Australian Securities Exchange yesterday that Rio "genuinely believes that an outcome of those discussions is likely to emerge during the course of this morning". The letter was released by Riversdale.
No update on these talks was issued yesterday, indicating that they failed, although there are suggestions that they might continue today or tomorrow.
Rio however released a late statement after trading had ended which said that the company had "waived the minimum acceptance condition to its offer for Riversdale".
"As the Offer is now unconditional, Riversdale shareholders who have accepted the Offer on or before today’s date will be paid the $16.00 Offer price by 5 April 2011.
"Riversdale shareholders who accept the Offer after today’s date will be paid the Offer price within five business days of that acceptance being received."
Rio said that it will "increase the Offer price to $16.50 per share if it obtains an interest in more than 47 per cent of Riversdale shares by 7.00pm (Sydney, Australia time) on 6 April 2011.
"Riversdale shareholders who have already accepted the Offer or accept the Offer prior to RTJ obtaining a more than 47 per cent interest of Riversdale shares will still be entitled to receive $16.50 per share if RTJ subsequently obtains that interest.
"These shareholders will receive payment of this additional amount within five business days of RTJ obtaining a more than 47 per cent interest."
Rio apparently believes there are a group of hedge funds with around 6% who have to wait until bids become unconditional to accept.
Rio said that it "must obtain an interest in more than an additional 5.96 per cent of Riversdale shares for the Offer price to increase to $16.50 per share".
Rio Tinto Energy chief executive Doug Ritchie said in the statement, "Riversdale’s shareholders have demonstrated great support for the Offer to date. Now that the Offer is unconditional, I would encourage those shareholders who have not yet accepted to do so as soon as possible to maximise the prospect of all shareholders receiving the increased Offer price of $16.50 per share.
"We look forward to moving quickly in developing Riversdale’s projects. Rio Tinto’s experience in infrastructure and developing large projects, combined with our financial capacity, will be important in taking Riversdale’s asset base to the next stage of development."
The offer was due to revert to $16 a share from $16.50, remaining open until April 6, if Rio did not reach 50% by the deadline on last Monday, March 28.
Rio shares fell yesterday to $81.35 before bouncing back a touch to end at $82.28, up 45c on Monday’s close.
Riversdale’s two key shareholders are Tata Steel of India and CSN of Brazil. Bloomberg said Rio was talking to the Brazilian company.
Tata Steel has been a long-time shareholder in Riversdale and recently lifted its stake in the company to 27%.
It has a director on Riversdale’s board who backed Rio Tinto’s takeover offer, without saying whether Tata Steel would accept it.
CSN, Brazil’s largest steelmaker, recently increased its Riversdale stake to 19.9% but has said nothing publicly about how it views Rio’s offer.
The shares ended Monday at $16.10, indicating investors expected Rio Tinto to drop the 50% condition on its offer of $16.50 a share.
That’s what happened yesterday.
A successful deal would mark Rio Tinto’s first major acquisition since its ill-timed US$38 billion takeover of Alcan in 2007 which almost caused the mining group’s collapse.
This deal won’t, and the upside for Rio is that it will get part control of two, high quality major developing coking coal projects in an area of Mozambique, attracting interest from mining and steel companies around the world.
Tata and CSN will determine if the bid is successful from Rio’s point of view. Both obviously want access to the coking coal Riversdale has.
The offer has been extended four times.
Riversdale also operates an anthracite colliery in South Africa.
