Rio Tinto Australia

Rio Tinto, Mitsubishi Corp. Bid $1.55 Billion for Rest of Coal & Allied

Rio Tinto Group, the world’s second- biggest mining company, and Mitsubishi Corp. (8058) offered A$1.49 billion ($1.55 billion) for the shares in Coal & Allied Industries Ltd. (CNA) they don’t own to take the coal miner private.

Rio and Mitsubishi, which own stakes of 75.7 percent and 10.2 percent respectively, made an initial offer of A$122 a share, 34 percent more than the Brisbane-based company’s closing price of A$91, Coal & Allied said today in a statement. The bid values Coal & Allied at A$10.6 billion, the company said.

Buying Coal & Allied will give London-based Rio and Mitsubishi full control of three coal mines in the Hunter Valley in Australia ’s New South Wales state as prices surge. The move comes after Rio’s A$3.4 billion acquisition of Riversdale Mining Ltd. last month and Peabody Energy Corp. and ArcelorMittal’s A$4.7 billion pending bid for Macarthur Coal Ltd.

Rio and Mitsubishi’s “bid reflects the dynamic of the market that we’re in with lots of interest in coal assets,” Michael McCarthy , chief market strategist at CMC Markets in Sydney, said by phone. “This is an attempt to deliver a knock- out bid and one that is high enough for the Coal & Allied board to recommend.”

Coal & Allied shares gained 29 percent to A$116.20 at the 4:10 p.m. close of Sydney trading. They traded as high as A$130.10 this year on Jan. 28. Rio Tinto fell 4.7 percent to A$68.63, compared with a 2.9 percent drop in the S&P/ASX 200 benchmark index.

Cash Flow

Rio Tinto generated $18 billion in cash from its operations in the year to Dec. 31, compared with a cash flow of $9.6 billion a year earlier, data on the Bloomberg shows. Rio has worked to repair its balance sheet, with the help of surging commodity prices as well as more than $11 billion in asset sales, after debt ballooned 19-fold with the purchase of aluminum producer Alcan Inc. in 2007.

Including Coal & Allied’s A$1.20 a share dividend, the offer values the target at 21.9 percent more than its one-month volume-weighted average price, Rio Tinto said.

Perpetual Ltd., Coal & Allied’s third-largest shareholder, supports the bid in the absence of a higher offer, it said in an e-mailed statement, meaning the companies have agreements for more than 90 percent of the target.

Pending and completed takeovers in the coal sector totaled $11 billion in the second quarter this year as coal prices trade near record highs with an average premium of 39 percent, the most in at least 10 years, according to data compiled by Bloomberg.

Rio Tinto lobs takeover proposal to Coal & Allied Industries ...

Rio Tinto (ASX:RIO) is a leading international mining group, combining Rio Tinto plc, a London listed public company headquartered in the UK, and Rio Tinto Limited.

The Group's major products include aluminium, copper, diamonds, energy products, gold, industrial minerals (borates, titanium dioxide, salt and talc), and iron ore. Its activities span the world but are strongly represented in Australia and North America. There are also significant businesses in South America, Asia, Europe and southern Africa.

Rio Tinto (ASX:RIO) has put a non-binding, conditional and indicative proposal to Coal & Allied Industries (ASX: CNA) which could lead to a takeover offer being made to acquire all the outstanding shares in CNA not held by Rio Tinto and Mitsubishi Development Pty Ltd.

Rio has given no assurances that the Indicative Proposal will lead to a takeover offer being made.

If it proceeds, the Indicative Proposal is expected to be implemented by way of an off-market takeover bid by a company that will be jointly owned by Rio Tinto and Mitsubishi.

If completed, the Indicative Proposal would result in those parties owning 80% and 20% of CNA respectively. Rio Tinto currently owns 75.7% of CNA and Mitsubishi currently owns 10.2% of CNA.

The Indicative Proposal by Rio contemplates an offer of $122.00 cash for each CNA share that is not owned by Rio Tinto and Mitsubishi, with existing CNA shareholders retaining the recently declared dividend of $1.20 per share.

The Indicative Proposal would value CNA equity at $10.6 billion.

The Company is a publisher and is not registered with or authorised by the Financial Services Authority (FSA). You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter.

You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate.

Minerals Yearbook, 2008, V. 1, Metals and Minerals

Australia Mineral and Mining Sector Investment and Business Guide

Plunkett's Energy Industry Almanac 2008

Mining journal, A record of mining and metallurgical progress

Minerals Yearbook 2006, Area Reports, International,, Asia and the Pacific