rio's strategy potential

http://au.news.yahoo.com/thewest/business/a/-/wa/12787865/rio-sells-kalahari-stake-to-chinese/

Rio sells Kalahari stake to Chinese
Kate Emery, The West Australian
February 2, 2012, 6:18 am

Investor hopes of a bidding war for Extract Resources were last night all but dead after Rio Tinto sold its stake in the Perth group's biggest shareholder to China, scotching speculation it could mount a $2.2 billion counter offer.

Rio's decision to sell its 11.1 per cent stake in London-listed Kalahari Minerals into China Guangdong Nuclear Power's £632 million ($933 million) cash takeover puts the Chinese group in striking distance of the 50 per cent threshold that will force it to launch a downstream offer for Extract.

It could also open the door to a Rio-CGNPC joint venture, given Rio's Rossing mine is just 7km from Extract's Husab project in Namibia - one of the world's biggest undeveloped uranium deposits and the prize at the heart of CGNPC's bid for Kalahari.

Rio, which picked up stakes in Kalahari and Extract in 2008 has long been seen as a potential bidder for Extract.

However, more recent industry speculation has focused on the likelihood Rio could partner with CGNPC in a Husab-Rossing joint venture.

Either way, Extract shareholders should know by tomorrow whether they are facing an $8.65-a-share cash offer from CGNPC. Its offer for Kalahari, conditional on securing 50 per cent, is scheduled to close in London tonight.

Kalahari's biggest asset by far is its 42.7 per cent stake in Extract and Australian corporate law dictates it would have to launch a bid for Extract if it succeeds in taking control of Kalahari. It would have four weeks to do so.

According to a substantial shareholder notice lodged for Extract on January 20 CGNPC had secured 30.8 per cent of Kalahari. Coupled with Rio's stake CGNPC's stake now stands at about 41.9 per cent.

The board of Extract has yet to make a call on whether to recommend a CGNPC takeover, saying it would wait for such an offer to be launched before making a formal recommendation.

Rio was also staying mum about its intentions for its 14.2 per cent stake in Extract, with its Rossing unit saying in a statement that "a decision about whether to accept any Extract offer will be taken in due course in light of any recommendation provided by the board of Extract".

Shares in Extract closed unchanged at $8.55 yesterday.