Rio Tinto enraged its institutional shareholders by preparing to sell part of its iron ore and copper assets to state-owned Chinalco Miles Costello and David Robertson The Association of British Insurers (ABI) is threatening to issue a rare redtop investor alert over the controversial terms of a $19.5 billion (£13.7 billion) fundraising by Rio Tinto, The Times has learnt. The ABI has already clashed with the Anglo-Australian miner over the capital-raising deal and is expected to issue the alert in weeks.
The warning comes as some of Rio’s largest shareholders pledged to continue their opposition to the proposed deal. They are concerned that the fundraising appears to give preferential treatement to Chinalco, the Chinese state metals group that already owns a 9 per cent stake in Rio.
Rio said last week that it would raise $12.3 billion by selling stakes in its most valuable mines to Chinalco. It plans to raise another $7.2 billion by issuing convertible bonds that will be redeemed in seven years. When the bonds convert, Chinalco will raise its stake in Rio from 9 to 18 per cent.
One leading Rio shareholder said: “There is the issue of selling assets at a price that seems superficially okay, and then there is the separate issue of preemption rights for shareholders. And it is here where the line is being drawn in the sand. “Investors are united on this – if Rio is allowed to abuse preemption, then it becomes open season for any company that wants to raise cash on preferential terms from outside investors to ride roughshod over our rights.”
The ABI wrote to Rio last week, before it went public with the Chinalco deal, “at the express request” of its members. In the letter, it urged the company to treat shareholders equally and reminded it of the importance of preemption rights. The association declined to comment on the prospect of it issuing a redtop alert, its highest level, to investors over company corporate governance concerns.
However, one insider said that it was more harmful to shareholders than Barclays’ controversial capital-raising from the Qatari royal family, which was also red-topped by the ABI. “And with Barclays, it was more sensitive, because we were worried about the stability of the financial system,” he said.
Leading investors in Rio Tinto argued that the row goes to the heart of the relationship between long-term shareholders and UK companies. They said that Rio’s board was particularly culpable because it had ignored investors’ clear preference for a rights issue and had dismissed the ABI’s warning. Investors said that they were worried that Rio would try to “railroad” through a single vote on both the asset sales and the capital-raising that would effectively ruin any chance of blocking a deal.
BHP Billiton is still understood to be considering crashing the arrangement between Rio and the Chinese, as revealed byThe Timeslast week. Several investors are reported to have asked BHP, which last year dropped a hostile bid for Rio, to suggest an alternative offer for some of Rio’s assets.
Rio hopes to complete the deal with Chinalco so that it can reduce its $39 billion debt mountain. The capital-raising will enable it to repay the $9 billion that is due this year and the $10 billion due in 2010. Tom Albanese, chief executive, said yesterday: “We will get the views of our shareholders first-hand and present to them the value we see in this joint venture. It is very important for us to engage on a face-to-face level with all our shareholders.”
British investors said that they were concerned that Rio would bring Australian shareholders, who trade the miner’s shares on the Australian Stock Exchange, into the vote to dilute opposition. They believe that Rio will try to ensure that only 50 per cent of investors need to approve the sale and capital-raising to push it through.
“If they really do bundle the vote or make it interconditional, then the board must consider its position,” a fund manager said. Another added: “The only thing that would appease us is to be included in the convertible issue. Either that, or they should have a rights issue, which we would support, with Chinalco as a sub-underwriter.”
they just bought Rio shares before ex Dividend day on 18/2/09
Rio Tinto's Skinner buys Mon 16 Feb 2009
LONDON (SHARECAST) - Rio Tinto’s chairman Paul Skinner, who was today reported to have pulled out of the running to become chairman of oil giant BP, has bought £77,520 worth of shares in the miner.
SHAREHOLDINGS OF DIRECTORS AND PERSONS DISCHARGING MANAGERIAL RESPONSIBILITY
On Monday 16 February 2009 Rio Tinto plc was notified that on 13 February 2009 a director had acquired Rio Tinto plc American Depositary Receipts (ADRs) as follows:
Director
No. of ADRs acquired
Price per ADR (USD)
Dick Evans
5,000
114.70
Dick Evans
5,000
114.67
Note: Each ADR represents four Rio Tinto plc ordinary shares of 10p each
Also on Monday 16 February 2009 Rio Tinto plc was notified that directors had acquired Rio Tinto plc ordinary shares as follows:
Director
No. of shares acquired
Price per share (GBP)
Lord Kerr
4,000
19.3800
Paul Skinner
4,000
19.6955
This announcement is made in accordance with the requirements of DTR 3.1.4 R.
This information is provided by RNS The company news service from the London Stock Exchange
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