Tata Steel has increased its stake in Riversdale Mining, Australia, by close to two per cent. The move gives a clear sense that the company has no intention to exit Riversdale anytime soon, putting to rest speculations to the contrarary.
Prior to Rio Tinto's $3.9-billion offer for Riversdale in December 2010, Tata Steel had 24.4 per cent stake in the company, now at over 26 per cent. Tata Steel did not respond to emailed queries. Riversdale, too, did not comment for the story. An analyst with an international research firm said: "Tata Steel has increased its stake yesterday morning. It's a clear indication that the company is not looking to exit Riversdale."
Tata Steel's last statement on Riversdale was issued on February 23: "Tata Steel has not yet made a decision in relation to the Rio Tinto offer and reserves its right to make that decision anytime during the offer period."
The company, time and again, has reiterated that its investment in Riversdale was of strategic importance for its raw material security.
Riversdale has access to 13 billion tonnes of coal reserves in Mozambique, with more exploration licences in the continent. Tata Steel already has a 35 per cent offtake agreement in Riversdale's nine-billion-tonne reserves, Benga coal project. The company is looking to raise its raw material security for its European operations through the coal project. The Indian steel major also has one board representation in Riversdale.
Before the Rio Tinto bid for Riversdale was announced, Tata Steel's 24.4 per cent stake in the company had made it the largest shareholder in the Australian miner. It was followed by CSN, Brazil with 13.3 per cent and passport capital, a hedge fund, at 12.98 per cent. CSN, too, over the past months, has increased its stake in Riversdale to 19.9 per cent. Tata Steel and CSN combined control close to 47 per cent of the company.
This makes it difficult for Rio Tinto to get a majority control over Riversdale. Rio, which has announced an open offer for it, has already extended the offer twice. The current extension is valid till March 18. It was earlier scheduled to close on March 4.
Shareholders totaling 14.9 per cent of Riversdale shares have already agreed to tender their shares to Rio in its open offer. Rio needs to reach the 50 per cent acceptance mark to conclude the acquisition.
Rio has clearly said its offer to Riversdale remains subject to a number of conditions, including, a greater than 50 per cent minimum acceptance conditions from shareholders.