Tata Steel to evaluate Rio Tinto offer for Riversdale
24 December 2010
Tata Steel Ltd, the largest shareholder in the holding company of Australia's Riversdale Mining Ltd, is evaluating the $3.9-billion takeover offer by Rio Tinto for the mining firm, the company announced today.
The Indian steel major's moves are being keenly monitored by international players, as it is expected to have a major say in the acquisition by Rio Tinto. The company said in a statement that it was evalauting the takeover bid in the context of other alternatives that were available to it, but did not clarify what those alternatives were.
A bidding war is expected to unfold over the coming weeks, with other international majors, including ArcelorMittal and diversified mining group Xstratra, expected to join in. Tata Steel is not expected to make any moves until the other bidders enter the scenario.
Narendra Kumar Misra, the Tata Steel nominee on the Riversdale board, abstained from voting on a resolution recommending the Rio Tinto offer to shareholders. The Indian private sector steel major raised its 7.29 per cent stake in Riversdale three years ago to 24 per cent through the creeping acquisition route.
Besides its 24-per cent stake in Riversdale, an Africa-focussed coal miner, Tata Steel also has a 35-per cent stake in one of its projects in Mozambique, with an off-take agreement for 40 per cent of its coking coal. Riversdale has coking and thermal coal reserves of 13 billion metric tonnes in two projcets in Mozambique.
Another Indian organisation that is keenly monitoring the developments is International Coal Ventures Ltd (ICVL), a consortium of five public sector majors including Coal India Ltd, Steel Authority of India, National Thermal Power Corporation, NMDC Ltd and Rashtriya Ispat Nigam. On Thursday, ICVL appointed Citigroup as a merchant banker to advise it on a possible counter-bid for Riversdale.
According to Partha Bhattacharyya, chairman, Coal India, Citi's mandate is to tell the consortium whether it should consider bidding higher than the $3.9 billion offer made by Rio Tino, which has offered a price of A$16 a share for Riversdale, raising it offer from its earlier offer of A$15.