By Agency Reporter

Thursday, 23 Dec 2010

SYDNEY: Anglo-Australian miner, Rio Tinto, is finalising a $3.8bn takeover bid for Africa-focused Riversdale, according to two sources, upping an earlier offer as it seeks to gain key coking coal supplies amid soaring demand from India and China.

Reuters reported on Wednesday that a formal bid for Mozambique-based Riversdale Mining could spark a bidding war by drawing out other suitors wanting access to what is expected to be the world‘s second-largest coal exporting market in coming years.

A group of state-run Indian firms had said it was looking at Riversdale and other major mining companies were also interested, sources had said.

Rio Tinto was locked in talks with Australian-listed Riversdale‘s board over an A$16 per share takeover offer but a final deal has not yet been completed because of some last minute wrangling over price, one source familiar with the matter said on Wednesday.

An announcement was expected either later Wednesday or Thursday, one source said, confirming media reports that Rio Tinto had offered around $16 per share for Riversdale. The sources could not be identified as they were not authorised to speak to the media.

An A$16 per share bid would be a 13.5 per cent premium to Riversdale‘s close on December 3 before news of Rio‘s interest was announced, but lower than its last trading price of $16.30.

Shares of Riversdale, which said earlier this month it was talking to Rio about a $15 per share offer, were placed in a trading halt on Tuesday after newspaper reports about a new offer.

There was some speculation Rio may offer up to $16.50 but one of the sources said on Wednesday the price was closer to $16.00.

Spokesmen for both Riversdale and Rio Tinto declined to comment.

Rio, the world‘s number two iron ore miner, wants to bulk up on coking coal reserves. Riversdale‘s large reserves had relatively low costs and are well situated to serve China and India‘s booming markets.

”With Mozambique emerging as a potentially substantial supplier, the trend will obviously be upwards if you‘re talking about Africa as a whole,” said Andrew Harrington, an analyst with Patersons Securities in Sydney.

Riversdale may eventually supply five per cent to 10 per cent of the global market for the key steel-making material, analysts say.

Source: Punch