RIV Riversdale Fpo

Rio Tinto PLC (RIO) failed to reach the majority stake it was chasing in Riversdale Mining Ltd. (RIV.AU), but said Tuesday the takeover offer remains open and it will accept a position as the largest shareholder accepting that may mean it won't be able to push through its plans for the Africa-focused coal company.

The bid, which values all of Riversdale at almost US$4 billion, was declared unconditional and the offer price set at A$16.50 a share provided Rio secures a more than 47% interest in Sydney-based Riversdale by April 6, the Anglo-Australian mining company said. Rio's effective interest had risen to 41.04%, short of the more than 50% threshold previously set for the offer by a late Monday deadline.

A successful deal would mark Rio's first major acquisition since its ill-timed US$38 billion takeover of Canadian aluminum producer Alcan Inc. at the height of the market in 2007 and would give it control of two major developing coking coal projects in an area of Mozambique attracting interest from mining and steel companies around the world. Riversdale's two largest shareholders, steel producers steel producer Cia. Siderurgica Nacional (SID) of Brazil and Tata Steel Ltd. (500470.BY) of India, together hold a deciding 47% stake but have remained quiet since the offer was first made in December.

A person familiar with the bid said Rio had been negotiating to buy Riversdale shares from CSN after failing to gain majority control by its deadline. Costas Condoleon--a partner at law firm Minter Ellison Group, which represents Rio Tinto--in a letter released through the Australian stock exchange said Rio held talks with a major unnamed shareholder in the coal company to secure a sufficient number of shares to secure a majority.

Analysts said Rio may be able to creep up to the 47% mark now that the bid is unconditional, something that had prevented some fund managers in Australia from accepting the offer.

Doug Ritchie, chief executive of Rio's energy division, said the company's experience developing large projects and its financial capacity are important in taking Riversdale's assets "to the next stage of development."

Riversdale operates a colliery in South Africa and is developing two projects in the Tete province of neighboring Mozambique, an area believed by some companies to be home to a massive deposit of high quality coal that may rival Australia's Bowen Basin in Queensland. The company's executives in January said that should Rio's offer fail, Riversdale would need to turn to its shareholders, the bond market and other sources to raise more than US$3 billion needed to fund the projects.

Rio in a statement said that if it secures less than a majority position in Riversdale, it won't alter its plans for the company but may mean its ability to influence Riversdale's decisions is limited and it may not be able to gain seats on Riversdale's board as it intends. It previously said it plans to sell Riversdale's South African coal operation, consolidate its head office with its own and seek the resignation of Riversdale's directors

The offer price will revert to A$16 a share if Riversdale doesn't gain at least a 47% stake, it said.

Support for the bid has slowly gained traction in recent weeks but was always going to be a close call without either CSN or Tata selling some or all their shares to Rio. CSN in February edged up its stake in Riversdale and then Tata Steel early this month raised its stake 2.9 percentage points to 27.1%.

Analysts have speculated that CSN and Tata increased their stakes to ensure they can negotiate for supplies of coking coal, a key raw material in steel making. The two clashed in early 2007 with the takeover of British steelmaker Corus Group PLC, bidding that was only settled by a nine-round sudden-death auction that pushed the price for winner Tata up by several billion dollars to US$12.2 billion.

CSN spokespeople weren't immediately reachable when telephoned out of business hours, and a spokesman for Tata declined to comment. Tata, which has a representative on Riversdale's board who supported Rio's offer, has previously said its investment in the coal company is strategic.

UBS advised Riversdale and Macquarie advised Rio Tinto.

-By Robb M. Stewart, Dow Jones Newswires; +61 3 9292 2094; robb.stewart@dowjones.com

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