China Acquires Major Stake in Rio Tinto Ahead of Expected BHP Bid

In an action that may obstruct a bid from BHP Billiton for Rio Tinto, U.S. aluminum mining giant Alcoa Inc. and Aluminum Corp. of China (Chinalco), a state-owned mining company, jointly acquired a 12 percent stake in Rio on Friday. The deal, the largest overseas investment ever by a Chinese company, is believed to be worth $14.05 billion.  

Although both companies stated in a regulatory filing that they did not “currently intend to make an offer for Rio Tinto PLC,” they did reserve the right to make an offer or participate in an offer within the next six months.

Alcoa stated that it would contribute $1.2 billion to the total investment. The deal was made through a Singapore-based entity.

Chinese miners have a serious stake in preventing a BHP takeover of Rio, which, if successful, would create a combined firm with control over a third of the world’s iron ore, as well as copper, aluminum and coal. Some analysts believe that the move is an attempt at blocking such a takeover.

Rio Tinto Chairman Paul Skinner commented, “This unsolicited development, of which we had no prior notice, reinforces our view of the long term value of Rio Tinto.”