Australian mining giant Rio Tinto Group and Australian Stock Exchange-listed mining company Riversdale Mining Limited (RML) have entered into a ‘bid implementation agreement' for a cash offer through which Rio Tinto would acquire all of the issued and outstanding shares of Riversdale by way of a recommended off-market takeover offer.
RML owns large coal mines in Mozambique and has become a target for global miners. Riversdale's assets include the Benga project and the neighbouring Zambeze project in Mozambique which have high quality coking coal.
The offer price of AU$16 (US$16.05) per share values RML at approximately AU$3.9 billion (US$3.91 billion) and is up from the previous AU$15 offer. The offer will be financed through Rio Tinto's existing cash reserves and credit facilities.
Indian steel giant Tata Steel Ltd and Brazil-based steelmaker Cia. Siderurgica Nacional are 24 percent and 13 percent shareholders of RML, respectively, press sources have reported, adding that these companies have not yet taken a stance on the offer. The news of the sweetened offer has increased the value of RML shares to over AU$16.5 on December 23.
The RML directors have recommended that shareholders accept Rio Tinto's offer and have indicated they intend to accept the offer for shares in Riversdale which they control, Rio Tinto said. Meanwhile, Rio Tinto has secured pre-bid agreements on interests in relation to 14.9 percent of Riversdale's current shares on issue.
The offer is subject to a number of conditions including Rio Tinto acquiring a relevant interest in excess of 50 percent in Riversdale, Foreign Investment Review Board approval as well as no material adverse change occurring and Riversdale conducting its business within certain specified parameters. A break fee of AU$37.8 million (US$38.07 million) is also payable to Rio Tinto in certain circumstances.
Rio Tinto and Riversdale expect to dispatch the bidder's statement and target's statement in relation to the offer in January 2011.
Indian newspaper Economic Times said on December 9 that Tata Steel could team up with an Indian metals company or a miner to make a counterbid for Riversdale Mining, in response to Rio Tinto's offer.
A memorandum of understanding between Chinese steelmaker WISCO and RML that would have given the Chinese company eight percent of the miner and 40 percent of the Zambeze project in return for an US$800 million investment in Zambeze has lapsed, according to press sources.