Rio Tinto partially sold to China
Chinese to buy into Rio Tinto
Source By Rebecca Keenan Article from: /August 24, 2008 10:59pm
The move effectively clears the way for the Aluminium Corporation of China (Chinalco) to block BHP Billiton’s $143 billion all-scrip bid to win control of Rio’s global operations.
“I have decided to raise no objections under Australia’s foreign investment policy,” Federal Treasurer Wayne Swan said.
Chinalco, in partnership with Alcoa Inc., bought a 9 per cent stake in London-based Rio in February and said in March it may seek to increase that holding.
The bid by China’s biggest aluminum producer may make it more difficult for Melbourne-based BHP to succeed in its all-stock takeover offer for Rio, the world’s third-largest mining company.
“This will underpin the Rio share price and also create uncertainty about whether or not BHP will get its deal over the line,” said Stephen Bartrop, a resources analyst at Stock Resource.
“Even if Chinalco doesn’t increase its stake, it shows they have the capacity to block the deal.”
However, Mr Swan signalled that the government would closely evaluate other applications by offshore investors to acquire stakes in companies holding strategic national assets.
“While Australia welcomes foreign investment in our economy, we will carefully examine national interest issues where these arise in relation to foreign sovereign ownership,” Mr Swan said.
“Chinalco will have to reapply to increase its stake beyond the level approved, and has agreed not to seek representation on Rio’s board,” Mr Swan said.
BHP chief executive Marius Kloppers wants the Chinese company’s support for his scrip-based takeover, which would create the world’s biggest producer of aluminum and energy coal.
Chinalco was a guest of BHP at the Olympic Games this month.
Mr Swan’s approval enables Chinalco to hold as much as 14.99 per cent of Rio’s London shares, equivalent to 11 percent of the mining company’s issued scrip.
Mr Bartrop said Chinlaco may be positioning itself to acquire alumina or aluminum assets that may be sold off if BHP buys Rio.
“It could do a soft deal with BHP and vote for the merger in return for securing the assets,” he said.
Chinese companies are making more acquisitions to help feed an economy that’s grown at more than 10 percent a year since 2001.
Chinalco bought Peru Copper Inc. for $860 million in August last year.
Chinalco and Alcoa bought the stake in Rio in a surprise raid just five days before BHP increased its takeover offer for Rio in February.
Rio rejected that offer as too low.
China’s steelmakers have said a combination of BHP and Rio would exert too much power in the iron-ore market.