Rio Tinto contemplating divestment of US assets

Rio Tinto Group, fending off a $147 billion dollar hostile bid from BHP Billiton Ltd, said it may spin off its North American coal business into a company called Cloud Peak Energy Inc. (See: Rio Tinto rejects BHP's revised offer of $147 billion)

Anglo-Australian Rio filed for an IPO of Cloud Peak Energy worth up to $1 billion, which is made up of most of the North American coal assets of its Energy America unit, but said it would make a decision on whether to pursue a listing or another form of divestment once both options had been fully explored.

The company noted that the total offering price was estimated solely to calculate its registration fee and may change. The lead underwriter for the offering is Credit Suisse Securities (USA) LLC. The offering of common stock will be made only by means of a prospectus.

"Last November, we said that we would explore the possible sale of some or all of the US coal assets of Rio Tinto Energy America," said Rio chief financial officer Guy Elliott. "We are in active discussions with a number of prospective buyers who have expressed strong interest in those coal assets.''

Second round bids for Energy America may be called in around the end of August, a source familiar with the matter said. A variety of domestic and international trade bidders are reportedly interested in the unit, as well as some of the larger private equity firms.

Rio said in November it was reviewing its options for the North American coal business to help pay debt used to purchase Alcan Inc. last year. (See: Update: Alcan to merge with Rio Tinto under $38.1 billion deal)