Anglo-Australian mining giant Rio Tinto has increased its offer for Riversdale Mining to £2.5 billion (A$3.9 billion), after initially offering £2.2 billion earlier this month.
Riversdale's directors said the offer provided "immediate value" and that they would recommend it to shareholders.
Riversdale Mining, headquartered in Sydney, Australia, is attractive to Rio for its huge coking-coal projects in Mozambique. "The acquisition of Riversdale is in line with our growth strategy of investing in, developing and operating large, long-term, cost-competitive mines and businesses," said Rio's energy chief Doug Ritchie.
"We believe Rio is one of the few groups in the world with the capabilities to develop [Riversdale's] projects quickly, bringing considerable benefit to the people of Mozambique."
Riversdale boss Michael O'Keeffe described Rio's offer as "transformational" for his company. "Riversdale is at the crossroads of having to commit significant resources and funds to develop our coal projects and to make substantial investments in infrastructure," the company said.
Riversdale’s chief operating officer Andries Engelbrecht told this magazine earlier this year that Mozambique was well placed to supply hard coking coal to emerging markets like India and Brazil. Not only is the steel industry booming in these countries, but a large number of new coal-fired power stations are being built. Mozambique coal will have a significant freight advantage over Australia and Canada because of the easy shipping route from Beira to India’s west coast coal ports from Maharashtra to Gujarat.
The offer price of A$16 per share represents a 46 per cent premium to the one-month volume weighted average price (VWAP) of Riversdale shares to 3 November 2010 and a 24 per cent premium to the one-month VWAP to 3 December 2010.
A takeover of Riversdale would be Rio's first major acquisition since its $38 billion purchase of Alcan in 2007, but speculation has also linked Brazil's Vale, which already has coal mines in Mozambique, and Tata Steel, Riversdale’s largest shareholder, as rival bidders.
