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Chinalco to buy new shares in Rio Tinto post rights issue

By Tong Hao (China Daily)
Updated: 2009-06-30 08:02

Chinalco has decided to participate in the $15.2-billion rights issue of global miner Rio Tinto.

China's State-owned nonferrous mineral processor has made up its mind to buy new shares this week offered by Rio Tinto to maintain its shareholding ratio in the company, British newspaper Daily Telegraph reported on Saturday, citing an anonymous person close to the Chinese company.

At present, Chinalco is the single largest shareholder of Rio Tinto, controlling 9.3 percent of its total shares. If Chinalco had decided not to subscribe to the rights issue, its ownership of Rio Tinto would have been diluted.

Rio Tinto launched the world's fifth largest rights issue after turning down Chinalco's $19.5-billion transaction on June 5. The right issue aims to raise approximately $11.8 billion for Rio Tinto plc and $3.4 billion for Rio Tinto Ltd. It is aimed at cutting a large amount of debt.

Related readings:  Chinalco lost Rio bid to Australian paranoia  Chinalco registers for Rio Tinto rights issue  Let Rio deal be a lesson in M&A strategy  How far will China's expansion bids go

Chinalco completed the registration process for the rights issue before the June 15 deadline but the company said then that it had not made up its mind on whether to participate in the issue or not.

According to the prospectus released by Rio Tinto on June 16, the right issue consists of 21 new Rio Tinto plc shares offered for every 40 existing shares at 1,400 pence ($9.68) per share and 21 new Rio Tinto Ltd shares offered for every 40 existing shares at AU$28.29 ($22.94) per share.

Rio Tinto said the subscription prices represent discounts of about 38.2 percent and 47.2 percent to the theoretical ex-rights prices (TERPs) of 2,265.6 pence and AU$53.61 per new Rio Tinto plc share and Rio Tinto Ltd share, respectively.

According to a report by Sunday Telegraph, Chinalco is now considering a large-scale investment in Anglo American Plc, a diversified mining and natural resources group. The newspaper said Anglo American Plc is now preparing for negotiations with the Chinese company.

Li Tangdi, an official from Chinalco's press department, declined to comment on the twin subjects.