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Tata ups Riversdale stake, spells trouble for Rio bid

The world's seventh-largest steel maker Tata Steel on Wednesday increased its stake in Australian mining company Riversdale Mining by almost 3% to 27.14% for over $101 million (Rs 454 crore). HT reports.

business Updated: Mar 02, 2011 21:04 IST
HT Correspondent

The world's seventh-largest steel maker Tata Steel on Wednesday increased its stake in Australian mining company Riversdale Mining by almost 3% to 27.14% for over $101 million (Rs 454 crore).

Riversdale has been the subject of a takeover move by global mining heavyweight Rio Tinto over the last two months, but Tata's increased stake in the firm makes Rio's job difficult.

Already the largest stakeholder in Riversdale, Tata alongwith Brazilian steel maker CSN now hold around 47% stake in the Australian firm. Recently, CSN had also increased its stake in the firm to 19.9% and though there is no official acknowledgment from either company, experts believe it is a tacit move to thwart Rio's bid.

"The way the two firms are increasing their stakes, it is clear that they want to send a signal to Rio," said a steel industry analyst. "It could also be that some minority shareholders in Riversdale do not want the takeover to take place and are supporting Tata and CSN."

Last month Rio had extended the deadline for its $3.9 billion takeover offer to March 18, but it requires the approval of atleast 50.1% shareholders in the company for the deal to take place. With the two biggest shareholders still not on Rio's side, it would need almost all the support from minority shareholders. So far it has won over just 17% of them.

Under Australian laws, Tata and CSN can continue to increase their stakes in Riversdale by 3% every six months without being forced to make a full takeover offer. Tata has maintained over the last few months that its investment in Riversdale was a means to securing coking coal from the miner for its steel mills in Europe. Tata has also been in talks with Rio over a range of options.