Well hot off the press on Sky business chennel and now in print. The Chinese are only looking at making some money, so if the price is right they will not stand in the way of the takeover. I would think they may also do a deal to get as much for the stock but more importantly get a stake in some of rio's assets that BHP may not be interested in.
Chinalco consortium won't lift Rio stake Email Print Normal font Large font February 4, 2008 - 7:27PM
Advertisement AdvertisementChina's state-owned aluminium giant Chinalco and its US partner Alcoa Inc say they have no plans to increase their stake in takeover target Rio Tinto Ltd.
Chinalco and Alcoa teamed to secure a 12 per cent stake in Rio Tinto's UK shares on Friday for $US14 billion ($A15.54 billion).
Western Australian Premier Alan Carpenter is nonplussed by increasing Chinese investment in the state's mining sector, saying he is encouraging it.
"I welcome Chinese investment in Western Australia because it is good for our economy.
"China has become our biggest trade partner and much of the economic vitality and strength we are enjoying here is due to our relationship with China.
"And just as with our relationship with other countries - the United States, Britain, Europe, Japan - have invested directly into the state's economy and been welcomed.
"Ultimately, control of our resources is a matter for the state government and the federal government, irrespective of the ownership and the structures of the companies involved.
The consortium said on Monday the investment in Rio Tinto was "strategic" and the group had no plan to increase its stake. This was despite reports it had applied to Australia's Foreign Investment Review Board (FIRB) to acquire up to 19.9 per cent of the target.
"We do not have plans to increase our stake in the company"," Chinalco president Xiao Yaqing told journalists in Sydney.
The managing director of Alcoa's Australian arm, Alan Cransberg, echoed his remarks, saying the group was "quite happy" with the stake and there was "no current intention to do anything different".
The stake equates to about nine per cent of the dual-listed company, the world's third largest mining company.
Mr Xiao said the consortium was not seeking a seat on the Rio Tinto board and did not want to "interfere with management".
However, Fat Prophets analyst Gavin Wendt said the stake "really does throw a spanner in the work's for BHP".
"At the end of the day, BHP are going to have to pay a much higher price than what they otherwise would have for Rio."
The move by the consortium has been interpreted as an attempt to block a takeover of Rio Tinto by BHP Billiton Ltd to prevent a change in the pricing of alumina.
"The reason Chinalco and Alcoa have teamed up to try and block the BHP offer for Rio is to prevent a structural change in the pricing of alumina," ABN Amro said in a client note.
Rio Tinto's acquisition of Canadian aluminium producer Alcan Inc means a combined BHP/Rio group would have a dominant position in alumina.
The share raid on Rio surprised BHP Billiton, which is preparing a formal bid for its rival, although analysts say the takeover is not dead in the water.
"We believe there is still hope for a BHP script bid for Rio," ABN AMRO said.
BHP Billiton is required to lodge a formal offer for Rio Tinto by Wednesday or walk away for six months under British regulatory law.
BHP Billiton has been touting an informal script offer of three of its own shares for every Rio Tinto share, which has been labelled too cheap by the target.
Vocal opposition to the proposed merger has emerged from steel mills and lobby groups in Europe and Asia, amid concerns a combined entity could have enormous control over commodity prices.
Asked if Chinalco would back any agreement by Rio Tinto to merge with BHP Billiton, Mr Xiao said the objective of the group's investment was to make an attractive return.
"The objective of this investment is to make a return. So if the return is attractive ... we'll be happy," he said.
Treasurer Wayne Swan declined to comment on the share raid, saying he had "no public comment to make about proposed takeovers".
Chinalco is already active in Australia, spending about $3 billion to develop a bauxite mine at Aurukun on Cape York in North Queensland.
Mr Xiao said the company was eager to continue its investments in Australia.
The consortium's move comes amid reports that China's sovereign investment fund in partnership with coal miner China Shenhua Group are in talks to buy a 15.85 per cent stake in Western Australian-based iron ore hopeful Fortescue Metals Group Ltd.
Fortescue said on Monday it had held talks with a number of potential strategic investors but said none "could be considered concluded or at a stage requiring specific disclosure."
Rio Tinto shares ended up 80 cents, or 0.63 per cent, at $128.11 on Monday after rising more than three per cent earlier in the session to a day high of $133.39.
The gains in the shares eroded once it became clear that Alcoa and Chinalco had no immediate plans to buy more stock.
BHP Billiton ended at $39.32 on Monday, up 77 cents or two per cent.
Regards ang01
RIO Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
(20min delay)