Rio Tinto claims support for Riversdale bid, but Tata Steel mum

Rio Tinto on Monday said its $3.9 billion sweetened bid for Sydney-based coal producer Riversdale Mining has the support of more shareholders.

Analysts, however, are sceptical it would be enough to lure the two biggest shareholders — Tata Steel and CSN — to divest their stake.

Anglo American mining giant Rio, which has set a final deadline of April 1 to gain majority control of Riversdale, informed the Australian Stock Exchange that it had got acceptances from 26.13% of shareholders as of March 11, up from 17.86%.

Earlier this month, Rio sweetened its bid for Riversdale Mining in a final attempt to secure a minimum 50.1% stake in the Australia-listed group that is developing coal deposits in Mozambique.

Under the offer, Rio revealed a cash offer of A$16.50 a share, up from A$16 previously, provided it reached 50.1% acceptance by March 23.

The revised offer, which has been extended by two weeks to April 1, is a 3% improvement from the previous bid.

“We remain confident that our latest offer, barring a rival proposal, should help us become the dominant shareholder,” a Rio executive who did not wish to be identified, told DNA.

Brazilian steel major CSN holds a 19% stake while Tata Steel has a 27% stake in Riversdale.

Without the support of either Tata Steel or CSN, Rio needs the support of nearly all minority shareholders of the Africa-focused miner. Hedge funds still hold nearly 18% stake in Riversdale, with investment firm Passport Capital having a 5.1% stake and 5.4% being held by other small investment firms.

Unsurprisingly, experts are “extremely sceptical” on Rio’s success for a full takeover of the Australian mining company.

“You have to bear in mind that not every hedge fund will tender as the offer is still conditional on 50%, so they will wait until the last minute,” said Gregory Lafitte, Asia merger arbitrage trader at Louis Capital Markets.

“Unless one of the two largest shareholders will tender its offer, it will be difficult for Rio to be able to reach 50%,” said Lafitte.

Another analyst at the Mumbai office of a foreign brokerage said that although Rio has sought more time to negotiate with Tata Steel and CSN by extending the deadline, the foreign brokerage believes that the revised offer “is not enough to encourage the two parties (Tata Steel and CSN) to change their minds.”

Koushik Chatterjee, group CFO, Tata Steel, declined to comment, saying the company has “nothing to add beyond its last holding statement”.

An email sent to CSN seeking a response went unanswered.

Riversdale’s reserves in Benga and Zambeze in Africa are some of the world’s largest untapped reserves of coking and thermal coal.

They are also close to the Indian Ocean and shipping lanes to China, India and Brazil, making them competitive with freight rates for Australian coking coal. However, institutional investors have been reluctant to commit without knowing Tata Steel and CSN’s intentions.