Rio Tinto plc (RIO) announced that it plans to acquire the remaining stake in Riversdale Mining Limited. by exercising its right under section 661A (1) of the Australian Corporations Act.
Currently, the company has a 99.76% stake in Riversdale through its wholly owned subsidiary Rio Tinto Jersey Holdings 2010 Limited.
Recently, Indian Steel major Tata Steel agreed to sell its holdings in Riversdale to Rio Tinto. Consequently, the company acquired a 26.28% stake in Riversdale for AUD 16.5 per share, or roughly $17.36. The deal was valued at $1.1 billion.
Tata Steel, however, was previously hesitant on selling the stake, as it did not have enough inventory of a long-term coal supply for feeding is European steel manufacturing plants.
Last year, in December, Rio Tinto announced that it will acquire all of the issued and outstanding shares of Riversdale at an offer price of A$16 per share, bringing the total consideration of A$3.9 billion. Rio Tinto decided to use its cash reserves and credit facilities to acquire the above.
With the acquisition of Riversdale, Rio Tinto expects to increase its production at a reduced cost. Further, Riversdale’s coal projects and anthracite colliery in Africa will support Rio Tinto’s growth strategy of investing in developing and operating large, long-term, cost-competitive mines and businesses.
Headquartered in London, UK, Rio Tinto plc is engaged in exploring, mining, and processing the earth’s mineral resources, producing a broad range of metals and minerals. Rio Tinto competes against global mining giants like BHP Billiton (BHP) and Vale (VALE).
We currently have a Neutral recommendation on the stock supported by a Zacks #3 Rank, which implies a short-term (1-3 months) Hold rating.
