Rio Tinto: Recommended A$16 per share cash offer by Rio Tinto for Riversdale

Rio Tinto: Recommended A$16 per share cash offer by Rio Tinto for Riversdale

Rio Tinto: Recommended A$16 per share cash offer by Rio Tinto for Riversdale

. Recommended cash offer price of A$16 per ordinary share values Riversdale at approximately A$3.9 billion1.

. Rio Tinto has entered into pre-bid agreements in relation to 14.9 per cent of Riversdale’s current shares on issue.

. Shareholders who have signed pre-bid agreements include a number of senior executives of Riversdale including Michael O’Keeffe (executive chairman), Steve Mallyon (managing director) and Niall Lenahan (chief financial officer).

. Rio Tinto’s offer provides Riversdale shareholders with an attractive, all-cash offer for their shares at a substantial premium to historical trading prices.

. Acquisition provides Rio Tinto with a substantial tier one coking coal development pipeline in the emerging Moatize Basin in Mozambique, in line with Rio Tinto’s strategy of developing large, long-life, low operating cost assets to grow shareholder value.

Rio Tinto Group (LSE: RIO, ASX: RIO, NYSE: RIO) (“Rio Tinto”) and Riversdale Mining Limited (ASX: RIV) (“Riversdale”) have entered into a Bid Implementation Agreement (“BIA”) for a cash offer (the “Offer”) by Rio Tinto2 to acquire all of the issued and outstanding shares of Riversdale by way of a recommended off-market takeover offer.

The Offer price of A$16 per share values Riversdale at approximately A$3.9 billion3. The Offer price represents a 46 per cent premium to the one-month volume weighted average price (“VWAP”) of Riversdale shares to 3 November 20104 and a 24 per cent premium to the one-month VWAP of Riversdale shares to 3 December 20105. The Offer will be financed through Rio Tinto’s existing cash reserves and credit facilities.

The Riversdale Directors6 have recommended, in the absence of a superior proposal, that shareholders accept Rio Tinto’s Offer and have indicated they intend to accept the Offer for shares in Riversdale which they control. Riversdale’s executive chairman (Michael O’Keeffe), managing director (Steve Mallyon) and chief financial officer (Niall Lenahan) have entered into pre-bid agreements in relation to shares in which they have a relevant interest.

In aggregate, Rio Tinto has secured pre-bid agreements in relation to 14.9 per cent of Riversdale’s current shares on issue. Doug Ritchie, Rio Tinto chief executive Energy said: “The acquisition of Riversdale is in line with our growth strategy of investing in, developing and operating large, long term, cost-competitive mines and businesses driven by the quality of each opportunity.”

“Rio Tinto’s extensive experience in infrastructure and large project development combined with our significant financial capacity means that we are well placed to take Riversdale’s asset base through its next phase of development. We believe Rio Tinto is one of the few groups in the world with the capabilities, values and incentives to develop the projects quickly and to a world-class standard, bringing considerable benefit to the people of Mozambique,” Mr Ritchie said.

“This investment underlines Rio Tinto’s commitment to Africa. Our reach extends beyond our operating mines to include an extensive exploration programme and numerous active projects in the region.”

Implementation

Rio Tinto and Riversdale have entered into a Bid Implementation Agreement in respect of the Offer. A copy of the BIA is attached to Riversdale’s announcement of the Offer.
The Offer is subject to a number of conditions including Rio Tinto acquiring a relevant interest in excess of 50 per cent in Riversdale, Foreign Investment Review Board approval as well as no material adverse change occurring and Riversdale conducting its business within certain specified parameters. A full list of the conditions to the Offer is set out in Appendix I.

The BIA also contains customary deal protection mechanisms including “no shop” and “no talk” restrictions and a matching right for Rio Tinto in the event of a competing proposal. A break fee of A$37.8 million is also payable to Rio Tinto in certain circumstances.

Next Steps

Rio Tinto and Riversdale expect to dispatch the Bidder’s Statement and Target’s Statement in relation to the Offer in January 2011.

1 On a fully diluted basis.

2 The offer is likely to be made by a wholly owned subsidiary of Rio Tinto.

3 See note 1.

4 Being the last day prior to speculation arising around potential takeover activity involving Riversdale.

5 Being the last day prior to the announcement of Riversdale’s discussions with Rio Tinto in relation to a possible corporate transaction.

6 Mr N.K. Misra, who is the Board nominee of Tata Steel, Riversdale’s largest shareholder, abstained from voting on the Board resolution to announce and recommend the Offer.

About Rio Tinto

Rio Tinto is a leading international mining group headquartered in the UK, combining Rio Tinto plc, a London and NYSE listed company, and Rio Tinto Limited, which is listed on the Australian Securities Exchange.

Rio Tinto’s business is finding, mining, and processing mineral resources. Major products are aluminium, copper, diamonds, energy (coal and uranium), gold, industrial minerals (borax, titanium dioxide, salt, talc) and iron ore. Activities span the world but are strongly represented in Australia and North America with significant businesses in South America, Asia, Europe and southern Africa.

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