Blackstone Denies Rio Rumour

Array
(
    [0] => Array
        (
            [0] => ((RIO))
            [1] => ((BHP))
        )

    [1] => Array
        (
            [0] => RIO
            [1] => BHP
        )

)

This story features RIO TINTO LIMITED, and other companies.
For more info SHARE ANALYSIS: RIO
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Leading US private equity firm Blackstone has denied a report in the London Daily Telegraph overnight that it is planning to put together a consortium to make a bid for Australian diversified mining giant Rio Tinto ((RIO)). The consortium is rumoured to include a Chinese sovereign wealth fund. The Telegraph suggests lawyers are in place, and that bankers and PR firms have been approached.

It also suggests Blackstone will look to break up the miner after acquisition, going as far as to sell the recently acquired aluminium producer Alcan and, most significantly, looking to sell off Rio’s iron ore assets.

Rio has itself already identified US$30bn in potential asset disposals, including its talc business, its uranium assets in Australia and the US, the Northparkes copper-gold mine in Australia, and the Greens Creek zinc-lead-silver mine in the US. Sale of these assets would help to provide protection against rival BHP Billiton ((BHP)) which has already made a US$141bn bid. Rio has declared that bid to be undervaluing the company.

If Blackstone were to acquire Rio with the Chinese in tow, one presumes targets for the rumoured sell off of the iron ore assets would not include BHP. The Chinese are concerned that if BHP were to acquire Rio the combined entity would control too much of the world’s iron ore market and would thus be able to play its advantage in price setting.

The previous Rio rumour had a consortium of Chinese steelmakers and government money making its own bid for Rio at up to US$200bn.

The Telegraph suggests Blackstone has put a figure on Rio’s iron ore assets alone of US$110bn value, which has been extrapolated from the price of over US$1bn offered for Australian miner Midwest Resources by China’s Sinosteel. Rio is currently capitalised by the market at about US$150bn.

Blackstone already has a Chinese element to it, before it starts putting together consortia. When the firm partially listed to great fanfare just before the subprime crisis hit the Chinese government took a 10% stake.

Shares in Rio trading in London had jumped 1.7% in early trade but following Blackstone’s denial they had slipped back to be up 0.66% on the close.

Click to view our Glossary of Financial Terms