Rio hikes Riversdale offer, seen edging closer to success

By Sonali Paul

MELBOURNE | Thu Mar 10, 2011 9:09am EST

MELBOURNE (Reuters) - Rio Tinto (RIO.AX) (RIO.L) raised its offer for coal miner Riversdale Mining (RIV.AX) with a final bid of $3.9 billion on Thursday, a move the target company said was helping to win over institutional shareholders.

Riversdale Chief Executive Steve Mallyon said momentum among institutions in support of the offer was building but he didn't know how the two biggest shareholders, India's Tata Steel (TISC.BO) and Brazil's CSN (CSNA3.SA), would respond.

Without their support, Rio needs nearly full buy-in from the rest of the Africa-focused miner's shareholders for the bid to succeed, but up to now institutions have been reluctant to commit without knowing the two steelmakers' intentions.

"I can say that from the institutional calls that I've made in the last few hours that there's some growing support for Rio Tinto," Mallyon told Reuters.

"I think there's momentum building with the institutions, which is important in terms of convincing groups like Tata that Rio's going to be successful," he said.

Rio Tinto raised its bid by 3 percent to A$16.50 a share and extended the offer period for a third time, to April 1, but said the new offer was final if no rival bids emerged.

Riversdale's shares seesawed in a wide range after Rio raised its offer, closing up 3.2 percent at A$15.61. But that was still below the offer price, suggesting some doubts that Rio Tinto would be able to meet its condition of 50.1 percent in acceptances.

As of March 4, Rio Tinto only had acceptances on 17.9 percent of Riversdale's shares.

"The market's clearly a bit skeptical that it will get across the line," said Peter Chilton, analyst at Constellation Capital Management, which owns shares in Rio Tinto.

Riversdale reiterated it was not aware of anyone lining up a competing offer.

"I don't think there's anyone else out there despite all of the rumors. It's been well-tested since the bid was announced in mid-December," Mallyon said.

Tata Steel, the world's No. 7 steelmaker, and top Brazilian steel producer CSN have increased their stakes in Riversdale since the bid. Combined, they hold 47 percent.

NOT HOSTILE

Tata, a long-time shareholder in Riversdale, has a director on the board who has backed Rio Tinto's offer. So Tata Steel is clearly not hostile to the bid.

Tata Steel Managing Director Hemant Nerurkar has said the company is mainly interested in securing coal supplies from Riversdale.