Global miner Rio Tinto Plc. (RIO) announced that it has raised its stake in Australia-based Riversdale Mining Limited.
The company acquired approximately 19.82 million common shares, representing 8.37% of the total shares and increased the stake to about 26.13%.
Last week, Rio Tinto increased its offer price to A$16.50 from the previous price of A$16.00, for acquiring Riversdale Mining shares.
Management stated that the increased price will be applicable if Rio Tinto acquires more than 50% stake by 23 March, 2011. If there are no competing proposals, the company stated that it will not increase its offer price.
Rio Tinto has extended the offer period for the third time. The extended time limit is April 1, 2011.
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 at A$3.9 billion. Rio Tinto decided to use its cash reserves and credit facilities to acquire the above.
The offer price of A$16 represented a 46% premium to the one-month volume weighted average price (VWAP) of Riversdale shares on November 3rd and 24% premium to the one-month VWAP of Riversdale shares on December 3rd.
The acquisition is expected to enhance Rio Tinto’s production at a much reduced cost. Riversdale has coal projects and anthracite colliery in Africa, which will fuel Rio Tinto’s growth strategy of investing in developing and operating large, long-term, cost-competitive mines and businesses.
Headquartered in London, United Kingdom, Rio Tinto engages in exploring, mining and processing the earth’s mineral resources.
We are encouraged by Rio Tinto’s massive investment plan, improved market conditions and the company’s cost reduction strategy. However, at the moment the ADR is considered to be quite expensive. Thus, we have a Neutral recommendation on the ADR with Zacks #3 Rank translating into a short-term rating of Hold.
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