rio tinto and chinalco deal may be scrapped

Rio Tinto and Chinalco deal may be scrapped

By Matt Chambers and Rowan Callick

The Australian

May 26, 2009 08:07am

Rio Tinto - Chinalco deal in doubt

Chairman to meet with investors, Government
Deal will have to be changed to get vote
RIO Tinto chairman Jan du Plessis will visit Canberra this week before meeting local shareholders, amid growing speculation that the mining giant's planned $US19.5 billion ($25 billion) deal with Chinalco has been scrapped.

The new chairman, who took over from Paul Skinner in April, is expected to meet officials from the Foreign Investment Review Board ahead of its mid-June deadline to approve the deal, reports The Australian.

Rio yesterday remained secretive about its chairman's moves, refusing to confirm his scheduled arrival in the country last night or today, or which cities he would visit on his week-long stay.

It is understood Mr du Plessis will first travel to Canberra, before heading to Melbourne, Sydney and then back to London next week.

Mr du Plessis will front Rio's local investors amid growing opposition to both a planned $US7.2 billion convertible bond sale and a $US12.3 billion sale of stakes in Rio's best iron ore, copper and aluminium assets to state-owned aluminium giant Chinalco.

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Herald Sun, 21 May 2009 Several big local shareholders, including Australian Foundation Investment Corp and Ausbil Dexia, have opposed the deal since February, when it was inked in an environment of frozen credit and equity markets.

But with those markets warming recently and Rio's share price more than doubling, the deal is now seen as even less appealing.

Rio's shares yesterday closed at $64.08, up from $45 in February.

A spokesman for Wayne Swan, who is due to rule on the deal next month, would not say whether the Treasurer or FIRB officials would meet Mr du Plessis.

It is thought Mr du Plessis is only granting an audience to Rio's 12 biggest local shareholders, almost all of whom hold shares with nominees and are not revealed as top 20 shareholders in the annual report.

A Rio spokeswoman said the chairman would be on a "listening tour" and would not put any potential changes to the deal to investors.

However, Rio has already notified Chinalco that changes will be needed to get the deal past shareholders.

Mr du Plessis has already met major London shareholders, whose vote is more important given that they will account for about three-quarters of the voting shares.

"Shareholders have been pretty outspoken on the deal and on the legitimacy of the current board," said one fund manager who holds the stock but has not been granted a meeting.

"The message (to Mr du Plessis) during the meetings will be pretty clear."

Separately, Chinese sources have indicated Chinalco is increasingly prepared to limit its equity stake in Rio to 15 per cent, rather than the 18 per cent for which it has bid.

Top Chinalco executives reportedly held an emergency meeting last week to discuss the company's response to the increasingly rowdy debate about the arrangements to raise their holding in Rio from 9.3 per cent to 18 per cent.

It said they conceded that they might be forced to accept some amendments, but would not concede a stake of less than 15 per cent.

Chinalco also wants includes two members on the board, one of the features of the deal most widely criticised among shareholders.


http://www.news.com.au/business/story/0,27753,25539385-462,00.html