Melbourne/Sydney: Global miner Rio Tinto is in talks with Brazil’s CSN to secure a majority stake in Africa-focused Riversdale Mining in a last-ditch bid to save its A$3.9 billion ($4 billion) takeover offer, a source said on Tuesday.
The offer, announced in December, was conditional on at least 50% acceptances, but so far Rio Tinto has secured only about 41% in its third major deal attempt since a badly timed $40 billion takeover of Alcan in 2007.
Rio has targeted Riversdale for a takeover because of its hard coking coal projects in Mozambique, which could eventually supply as much as one-tenth of the global market for the key steel-making ingredient.
Rio Tinto said on Tuesday it was in talks with one of Riversdale’s two major shareholders -- Tata Steel and CSN -- without revealing which one.
Rio Tinto’s lawyer said in a letter released to the Australian stock exchange 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.
One source familiar with the talks said Rio was talking to CSN about the Brazilian shareholder’s stake in Riversdale, with an outcome expected Tuesday.
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.
CSN’s chief spokesman was not available for comment.
Neither CSN nor Tata want the offer to fail but both were reluctant to reduce their holdings because it would lessen their bargaining power to control coal supplies, sources say.
Analysts expect Riversdale’s shares to slide if Rio Tinto walks away. “If they don’t do the deal, it starts to look like it’ll be quite difficult to take over Riversdale. So any takeover premiums that were in the price might come out,” said Chris Drew, an analyst at broker RBC Capital Markets.
“You could see it back down to as low as $12 -- that’s if Rio decides to walk away and not sit on the 40%.”
Tata Steel, the world’s no.7 steelmaker, is a long-time shareholder in Riversdale and recently increased its stake in the Australia-listed company to 27%.
It has a director on Riversdale’s board who backed Rio Tinto’s offer, without saying whether Tata would accept it.
Tata Steel managing director Heman Nerurkar told Reuters last month the company was mainly interested in securing coal supplies from Riversdale and was talking to Rio about a range of options.
Rio’s lawyer said that following talks on Tuesday, Rio would say whether it would go ahead with the offer free of conditions, or make some other major announcement about the bid.
Riversdale’s shares were put on a trading halt on Tuesday pending an announcement from Rio Tinto. The stock closed on Monday at A$16.10, indicating investors expected Rio Tinto to drop the 50% condition on its offer of A$16.50 a share.
The offer was due to revert to A$16 a share and remain open until 6 April if Rio failed to reach a majority holding by Monday, 28 March.
UBS is advising Riversdale and Macquarie is advising Rio Tinto on the deal.