Mar. 2: Tata Steel has raised its stake in Australia’s Riversdale mining, making it harder for miner Rio Tinto to seal its $3.9 billion bid for the Mozambique-focused coal miner. Riversdale shares fell as much as 6.5 per cent to a three-month low of a $14.48 on Wednesday, valuing the group 10 per cent below Rio’s offer, indicating growing doubts about the deal going ahead.
“The share price is telling you that the market thinks that it’s going to end in a stalemate, the deal will fall over and Rio will walk,” said CLSA analyst Mr Hayden Bairstow. Tata Steel, already Riversdale’s biggest shareholder, spent more than a $100 million ($101 million) upping its stake in Riversdale to 27.1 per cent from 24.2 per cent, according to a shareholder notice, confirming what sources said. Riversdale’s second-largest shareholder, top Brazilian steelmaker CSN, also recently increased its stake in the Australia-listed company to 19.9 per cent.
Tata Steel, the world’s number seven steelmaker, and CSN now own 47 per cent of Riversdale, making it extremely difficult for Rio Tinto to secure the 50.1 per cent acceptances it wants before going ahead with the deal. Rio now needs almost 100 per cent acceptances from minority shareholders and has so far won over just 17 per cent of the company.
“Rio seems to be in extreme difficulty,” said Mr Gregory Lafitte, Asia merger arbitrage trader at LCM in Hong Kong. “It’s possible to see Rio Tinto reduce the 50 per cent acceptance condition or reach a strategic agreement with Tata and CSN,” he said. Rio Tinto declined to comment on the status of its talks with Riversdale’s shareholders. Rio last month extended the offer deadline to March 18 after Tata Steel said it had yet to decide whether to hold or sell its stake.
Tata Steel managing director, Mr Hemant Nerurkar, said the company was interested in securing coking coal from Riversdale for its steel mills and was talking to Rio on these issues. Tata Steel already has a stake in Riversdale’s Benga coking coal project in Mozambique with an agreement to buy supply from the mine.