Rio Tinto in £2.5bn bid for coal giant Riversdale

MINING group Rio Tinto yesterday offered £2.5 billion to buy African-focussed coal miner Riversdale in an agreed deal that is likely to be challenged by rival suitors.

Rio Tinto's first big acquisition since its ill-timed purchase of Alcan in 2007 aims to capitalise on soaring Asian demand for coking coal, a key steel-making ingredient, but needs the backing of at least one of Riversdale's three large shareholders which including India's Tata Steel.

While analysts said major investors may oppose Rio's offer, Riversdale's managing director Steve Mallyon said he expected a positive response.

The company's third-largest shareholder, US-based fund Passport Capital, has already committed an unspecified number of its shares to a pre-bid agreement that gives Rio Tinto options over 14.9 per cent of Riversdale's stock.

Tata Steel, whose Riversdale board nominee abstained from voting on the bid, declined to comment.