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CommentsOre miner Rio Tinto is preparing for growth by selling almost all (96.97%) of its UK rights with a discounted offer of $15.2 billion. So far, this is the fifth-biggest rights offer ever made, and investors, who view this move as important in ensuring the company’s survival, are fully behind the cash-generating effort.
Rio Tinto is in debt for $38 billion due to its acquisition of Canadian aluminium manufacturer Alcan in 2007.
Several shareholders have expressed interest, including China government-controlled resources group Chinalco, which is ready to take up the full claim. At present, Chinalco owns 9% of the company’s dual listings.
Analysts believe that this development is a sign that investor confidence is up from the negative impact caused by a “hostile takeover” and soured relations between China and the mining giant.
Rio Tinto confirmed in February 2009 Chinalco’s $19.5 billion investment in the company that would have increased the latter’s stake from 9% to 18%. However, in June, it decided to sever ties with Chinalco and announced a partnership with rival BHP Billiton.
Chinalco’s bid for full entitlement evidently indicates the soured relations are over, according to Ross Barker, managing director of Australian Foundation Investment Co.
The company’s cash-raising campaign has had several shareholders interested. Australian packaging group Amcor Ltd is negotiating with Rio over acquiring a portion of Alcan’s packaging business, estimated by Deutsche Bank to bring in $1.5 billion.
However, analysts claim that it will take more than the discounted rights offer to unsaddle Rio’s debts. Several suggest that Rio sell non-core assets to help pay it off.
Rio Tinto is a pioneer international mining group, combined in a dual listing of Lon-based Rio Tinto plc and Australian Rio Tinto Limited. Rio finds, mines, and processes mineral resources and have as major products aluminium, copper, diamonds, gold, industrial minerals, and iron ore.
Post Author: guest