1:35 AM
By Michael Smith
SYDNEY | Wed Dec 22, 2010 4:06am EST
SYDNEY (Reuters) - Anglo-Australian miner Rio Tinto (RIO.AX) is finalizing a $3.8 billion takeover bid for Africa-focused Riversdale (RIV.AX), according to two sources, upping an earlier offer as it seeks to gain key coking coal supplies amid soaring demand from India and China.
A formal bid for Mozambique-based Riversdale Mining could spark a bidding war by drawing out other suitors wanting access to what is expected to be the world's second-largest coal exporting market in coming years. A group of state-run Indian firms has said it is looking at Riversdale and other major mining companies are also interested, sources have said.
Rio Tinto (RIO.L) was locked in talks with Australian-listed Riversdale's board over an A$16 per share takeover offer but a final deal has not yet been completed because of some last minute wrangling over price, one source familiar with the matter said Wednesday.
An announcement was expected either later Wednesday or Thursday, one source said, confirming media reports that Rio Tinto had offered around A$16 per share for Riversdale. The sources could not be identified as they were not authorized to speak to the media.
An A$16 per share bid would be a 13.5 percent premium to Riversdale's close on December 3 before news of Rio's interest was announced, but lower than its last trading price of A$16.30.
Shares of Riversdale, which said earlier this month it was talking to Rio about a A$15 per share offer, were placed in a trading halt on Tuesday after newspaper reports about a new offer.
There was some speculation Rio may offer up to A$16.50 but one of the sources said on Wednesday the price was closer to A$$16.00.
Spokesmen for both Riversdale and Rio Tinto declined to comment.
HIGH-GROWTH MARKET
Rio, the world's No. 2 iron ore miner, wants to bulk up on coking coal reserves. Riversdale's large reserves have relatively low costs and are well situated to serve China and India's booming markets.
"With Mozambique emerging as a potentially substantial supplier, the trend will obviously be upwards if you're talking about Africa as a whole," said Andrew Harrington, an analyst with Patersons Securities in Sydney.
Riversdale may eventually supply 5-10 percent of the global market for the key steel-making material, analysts say.
Chinese firms have been investing heavily in coal mines in countries like Australia, South Africa, Indonesia and Russia to meet growing demand, while Indian companies are also stepping up their efforts to secure raw materials.
Five state-run Indian firms last week confirmed they were considering an offer and a source at a member of the consortium said a meeting was planned later on Wednesday to appoint a merchant bank to advise on whether to bid.
"We are inclined toward bidding, subject to the outcome of due diligence," the source said, requesting anonymity.
Posts
