Rio Tinto Group, the world’s third-biggest mining company, offered A$3.9 billion (US$3.9 billion) for Australian coking coal developer Riversdale Mining Ltd to gain reserves in Mozambique as demand rises.
Rio offered A$16 a share, the London-based company said yesterday in a statement.
Riversdale shares climbed to A$16.65 at 1:04pm in Sydney, 4 percent more than Rio’s offer which was recommended by all of Riversdale’s board, bar the director appointed by Tata Steel Ltd, its largest shareholder.
Buying Riversdale will raise Rio’s reserves of steelmaking coal as demand climbs and mark a return to acquisitions after its purchase of Alcan Inc in 2007 saddled it with almost US$40 billion of debt before the global financial crisis. Coal deals this year have more than doubled to US$36 billion after imports by China, the biggest consumer, surged fivefold last year.
“They’re underweight coking coal, so this was a clear gap in their portfolio,” said Prasad Patkar, who helps manage about US$1.8 billion at Platypus Asset Management Ltd in Sydney. “Mozambique is regarded as the future of metallurgical coal, and they’re getting a foothold there. Rio is back in M&A mode.”
The offer is 13 percent higher than the A$14.10 Riversdale closed at on Dec. 3, the last trading day before it said Rio had offered A$3.5 billion. Riversdale said Dec. 6 it had held talks with Rio on a proposal at A$15 a share.
Rio is advised by Macquarie Group Ltd on the deal and Riversdale by UBS AG.
“The acquisition of Riversdale is in line with our growth strategy of investing in, developing and operating large, long term, cost-competitive mines and businesses,” Doug Ritchie, chief executive of Rio’s energy unit, said in the statement.
A successful bid for control would require the support of at least one of Riversdale’s major shareholders, with the top three investors owning about 51 percent of the company.
India’s Tata Steel holds a 24.2 percent stake as well as a 35 percent interest in Riversdale’s Benga project in Mozambique, where exports are scheduled to start next year.
Rio has secured 14.9 percent of Riversdale’s shares in pre-bid agreements with some shareholders, including senior executives.
“Riversdale is at the crossroads of having to commit significant resources and funds to develop our coal projects and to make substantial investments in infrastructure, particularly for the Zambeze coal project,” managing director Steve Mallyon said in the statement. “The offer provides immediate value certainty and, if accepted, shareholders do not have to inject further equity to fund the development.”
Riversdale is also in talks with Wuhan Iron & Steel Corp (武漢鋼鐵) on a potential US$800 million investment by the Chinese steelmaker. Discussions are continuing after a deadline for an agreement expired, Riversdale said on Oct. 27.
Global mining deals have more than doubled this year to US$142 billion, according to data compiled by Bloomberg. That’s the highest since 2007’s US$151 billion.
Global demand for coking coal may rise 16 percent to 259 million tonnes this year, UBS AG estimated. The market will tighten further next year and in 2012 with an estimated deficit of 4 million to 6 million tonnes driven by demand from China and India, UBS said.
A successful takeover by Rio would add 13 billion tonnes of coking coal to its resources, according to its Web site.