Rio Tinto Rejects Chinalco Bid
Rio Tinto and its former rival BHP Billiton are forming a 50/50 joint venture that will consolidate all their iron ore assets in Western Australia and save them more than US$10 billion. In addition, BHP Billiton will be paying Rio US$5.8 billion to join the iron ore joint venture.
The decision will allow Rio to pay for US$38.9 billion of its debt without selling stakes of its largest mines to Chinese state-owned company, Chinalco. The Chinalco bid for Rio’s mine became a heated issue as Australian politicians and the company’s fourth-largest shareholder, Australian Foundation Investment Co (AFIC), opposed the move as damaging to national interest.
In a statement, Chinalco President Xiong Weiping said that the firm “very disappointed” with the failure of its investment plan.
Rio Tinto said in a statement that investors will be offered 21 new shares for every 40 they hold at 1,400 pence each, 49 percent below yesterday’s close in London,.
“The Chinalco deal was wrong in a strategic sense,” said Prasad Patkar, who helps manage close to $1 billion at Platypus Asset Management in Sydney told Bloomberg. “The market was right in marking the management and board down for trying to jam it down shareholders’ throats. But you have to give Rio’s new chairman Jan Du Plessis due credit for listening and pursuing alternatives.”
Currently, China is Australia’s largest bilateral trading partner and the second largest export market. China will have to buy majority of its iron ore imports from Rio and BHP this year to meet demands from steelmakers.
- Previous Article New Food Safety Law Effective this Month
- Next Article Gov’t Wants Censor Software on All PCs Sold in China