Rio Tinto’s US$3.9 billion bid for Africa-focused coal miner Riversdale gained steam yesterday after a representative of Riversdale’s top shareholder Tata Steel backed the offer.
The full board of Riversdale, coveted for its coal projects in Mozambique, recommended the bid saying it was unaware of any other offers in the works, even as an Indian consortium said it planned to decide on Thursday whether to bid.
Riversdale managing director Steve Mallyon said his company “had not had one call” from the consortium, called ICVL and made up of an Indian steel maker, iron ore miner and a utility, which may be interested in the coal for its own use.
HARD TO FATHOM
“I’ve met a couple of the companies in ICVL [in the past] and I am at a loss to understand the -interest,” Mallyon said.
Mallyon said negotiations were already underway to sell a large portion of the company’s future coking coal to steelmakers in Brazil, Europe and possibly China, and talks were in a late stage to tie up the company’s thermal coal output with a major commodities trading house, leaving little for Indian buyers.
“So we’ve only got about 10 million tonnes of coking coal to play with for a number of years and that’s not a lot to play with,” Mallyon said. “This does not seem to be the type of tonnes the Indians would be seeking.”
Tata Steel has already signed a supply agreement for 40 percent of the production from Riversdale’s main Benga mine, scheduled to start up this year.
As of yesterday, no superior proposal to Rio Tinto’s offer had been received, Riversdale said in a statement after releasing its official response to Rio Tinto’s bid, adding the company was not aware of any party having an intention to make such a proposal.
While Tata Steel’s representative on Riversdale’s board, N.K. Misra, recommended Rio Tinto’s offer, Mallyon said his support was not a sign of Tata Steel’s intent for its Riversdale stake.
“I’m not privy how they [Tata] are going to handle this, with our Tata director we’ve been focused on the Riversdale board recommendation versus what Tata wants to do,” Mallyon said.
“I think as Tata gets to know Rio Tinto as well as we do, they will then make a decision, but I don’t think they are at that point yet,” Mallyon said.
Given that Misra is Tata’s head of mergers and acquisitions, his recommendation of Rio Tinto’s bid at least makes it clear that Tata Steel itself was not planning to trump Rio Tinto.
Riversdale’s shares rose 1.2 percent to A$16.50, only a 3 percent premium to Rio’s A$16 a share offer, indicating investors are not expecting a higher offer to emerge.