Chinalco Said to Acquire 880 Million Pounds of Rio Tinto Shares

Chinalco Said to Acquire 880 Million Pounds of Rio Tinto Shares


June 29 (Bloomberg) -- Aluminum Corp. of China plans to buy 880 million pounds ($1.5 billion) of Rio Tinto Group stock, taking its share of a rights offer by the world’s third-biggest mining company, said two people familiar with the matter.

Chinalco, as the state-owned entity is known, may buy about 63 million new shares in Rio, said one of the people, who didn’t want to be named because the transaction is confidential. London-based Rio is selling $15.2 billion of stock in the U.K. and Australia to help pay debt.

The sale would allow Beijing-based Chinalco to retain its 9 percent stake after its proposed $19.5 billion investment in Rio, the largest single foreign investment by a Chinese company, was rebuffed. Rio instead opted to sell shares and agreed to form an iron ore venture with BHP Billiton Ltd.

Rio is offering existing shareholders the right to buy 21 new shares for every 40 they hold at 1,400 pence for its London shares and A$28.29 for its Sydney shares. The offer is scheduled to close at 5 p.m. Melbourne time July 1, according to company filings.

Shares of Rio in Sydney fell 1.4 percent to A$50.27 on the Australian stock exchange at the 4:10 p.m. close. The London stock recently traded at 2,075 pence. Beijing-based Chinalco Vice President Lu Youqing and Rio spokesman Ian Head in Melbourne declined to comment today.

Rio is issuing 524,348,975 new shares traded in London, representing about 52.5 percent of its existing share capital and 34.4 percent of the enlarged share capital traded in London, according to a statement.

BHP Bid

The Chinese company and Alcoa Inc. in February last year paid 7.2 billion pounds, or 6,000 pence a share, for a stake in Rio Tinto Plc, which then was seeking to thwart a hostile bid from BHP Billiton Ltd. Chinalco later bought Alcoa out of its stake in the Rio holding.

BHP abandoned its $66 billion offer in November citing Rio’s high-level of debt and declining commodity markets.

Credit Suisse Group AG, J.P. Morgan Cazenove Ltd., Deutsche Bank AG, Morgan Stanley and Macquarie Capital Ltd. are the joint global coordinators on the rights issue.

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