Global miner Rio Tinto Plc. (RIO) extended the offer period for acquiring Australia-based Riversdale Mining Limited to April 6, 2011. The previous offer date was April 1, 2011 and the period now stands extended by three working days.
Currently, the company has approximately 82.7 million shares of Riversdale, representing 34.94% of the total shares, up from 33.04%.
Rio Tinto’s increased offer price of $16.50 will be applicable only if Rio Tinto acquires more than 50% stake by the extended time limit of March 28, 2011. The company has extended the time limit from March 23, 2011.
Management stated that the extended days would provide enough time to finalize the unwinding of equity swaps and settle trades that have occurred on the Australian Securities Exchange.
Earlier, Rio Tinto had increased its offer price to $16.50 from the previous price of $16.00, for acquiring Riversdale Mining shares.
In December 2010, Rio Tinto offered to purchase Riversdale’s shares for A$16 per share, bringing the total consideration to A$3.9 billion. Rio Tinto decided to use its cash reserves and credit facilities for the acquisition.
The offer price of A$16 represented a 46% premium to the one-month volume weighted average price (VWAP) of Riversdale shares on November 3 and 24% premium to the one-month VWAP of Riversdale shares on December 3.
With the acquisition of Riversdale, Rio Tinto’s production is expected to increase at a much lower 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, United Kingdom, Rio Tinto engages in exploring, mining and processing the earth’s mineral resources.
We are optimistic on Rio Tinto’s massive investment plan and its cost reduction strategy amid improved market conditions. However, at the moment we believe that the ADR is quite expensive. Thus, we have a Neutral recommendation on the ADR with a Zacks #3 Rank translating into a short-term rating of Hold.
RIO TINTO-ADR (RIO): Free Stock Analysis Report
Zacks Investment Research
