Riversdale poised for bid war after £2.2bn offer

MinING giant Rio Tinto yesterday made a £2.2 billion bid approach for Riversdale Mining, setting up a potential takeover battle for the Africa-focused business.

Australian-based Riversdale owns projects in Mozambique that could eventually supply 5-10 per cent of the global market for coking-coal, a key material for steel manufacturing.

In a statement, Riversdale hinted it was talking to others. "While discussions with Rio Tinto are ongoing, there is no certainty that Rio Tinto or any other party will proceed with any proposal for the acquisition of Riversdale," it said.

Brazil's Vale is seen by some analysts as the most likely rival bidder, as it already has coal mines nearby in Mozambique.

India's Tata Steel, Riversdale's top shareholder, was also seen as a potential suitor. Xstrata, Anglo American and Peabody Energy might also be interested. Top coking-coal exporter BHP Billiton is seen as a less likely contender, as it has its own growth options in Australia.

Tata said it regarded its Riversdale stake as a strategic investment. "We will continue to monitor the situation and will take appropriate action as deemed necessary," the company said.

Riverside's fourth-biggest shareholder, investment firm LinQ Management, said it expects a battle for the company to be hotly contested, given the scarcity of good quality coking-coal assets and booming demand from China and India for the commodity.

LinQ managing director Clive Donner said. "It's in a good part of the world for accessibility, and we think there's plenty of further upside for whoever's interested in buying it. Hopefully there will be other interested suitors coming to the table."

A deal would mark Rio Tinto's first significant acquisition since its takeover of Alcan at the height of the commodities boom in 2007. Shares in Rio Tinto closed up 40.5p at 4,456.5p.