This article from Bloomberg. So what’s the chance Temasek features in Plan B?
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Rio Tinto Has ‘Plan B’ If Chinalco’s Proposal Fails (Update2)
2009-03-26 03:35:54.266 GMT (Adds investor’s comment in fourth paragraph.) By Jesse Riseborough and Rebecca Keenan March 26 (Bloomberg) –
Rio Tinto Group said it will consider selling shares or bonds should shareholders or regulators reject a proposed $19.5 billion investment by Aluminum Corp. of China that is needed to repay debt.
The world’s third-largest mining company may also sell more assets, reschedule debt or combine the four options under a “Plan B,” Chief Financial Officer Guy Elliott said today in Singapore. London-based Rio has $38.7 billion of debt.
Rio has faced a backlash from shareholders over the planned investment by the China state-controlled company and Australian lawmakers have begun an inquiry. Legal & General Plc, the second-largest institutional shareholder in Rio’s U.K. shares, has called for an alternative proposal.
“Many institutional investors have indicated they don’t like the deal,” said Albert Hung, who helps manage the equivalent of $783 million at Alleron Investment Ltd. in Sydney, including Rio stock. “Most of the institutional investors would like to put in more equity into the company.”
Rio gained 0.1 percent to A$53.96 as of 2:27 p.m. Sydney time on the Australian stock exchange, after falling as much as 3.4 percent. That compares to a 1.5 percent gain by BHP Billiton Ltd., the world’s largest mining company. Melbourne-based BHP last year walked away from a $66 billion bid for Rio, citing the debt concern and slowing global economy.
Beijing-based Aluminum Corp. is also known as Chinalco. Rio is listed in both London and Australia.
‘Plan B’
“We have plans in the eventuality that either the various governments or the shareholders prevent the deal going through,” Elliott said at a mining conference. “What I can assure you is we have a Plan B, from the ways that I’ve described, in good preparation.”
The proposed deal requires approval from Rio shareholders and Australia’s Foreign Investment Review Board. The board last week extended its investigation by 90 days. It will provide a recommendation to Treasurer Wayne Swan, who will make a final decision whether the deal is in Australia’s national interest.
“We don’t expect there should be any further extension to that time” for the review board, Elliott said. “This transaction is in the interests of Australia. We think it will go through.” Chinalco agreed on Feb. 12 to buy $7.2 billion of convertible bonds and will acquire stakes in Rio’s projects in countries including Chile, Australia and the U.S.
Chinalco will own 18 percent of Rio should it convert the debt. Rio had incurred its debt from the 2007 acquisition of Alcan Inc.
Barnaby Joyce, an opposition senator in Australia, ran an advertising campaign against the Chinalco investment. Australian Foundation Investment Co., the largest Australian-based shareholder of Rio, has spoken out against the proposal.
For Related News and Information: Link to Company News: RIO LN CN Top Stories: TOP Top Metal Stories: TOP MET –With reporting by Helen Yuan in Singapore. Editors: Tan Hwee Ann, Teo Chian Wei. To contact the reporters on this story: Jesse Riseborough in Singapore at +65-9233-6096 or jriseborough@bloomberg.net; Rebecca Keenan in Melbourne at +61-3-9228-8721 or rkeenan5@bloomberg.net To contact the editor responsible for this story: Teo Chian Wei at +65-6212-1541 or cwteo@bloomberg.net.
