Rio’s Timely Antidote To Poison Pill
Rio Tinto has won out against billionaire Robert Friedland’s attempts to ensure any unwanted move on his Ivanhoe Mines sparks a bidding war. Just don’t expect Rio to rush a takeover.
An independent arbitrator in a dispute between the mining companies has ruled that Rio is protected from having its 49% stake in Ivanhoe diluted should any bid for Ivanhoe from Rio or anyone else trigger a poison pill defense adopted by Ivanhoe’s board last year.
The decision effectively leaves Rio free to increase its stake in Ivanhoe after Jan. 18, when a five-year-old pact between the companies capping its investment at 49% expires. At stake is the massive Oyu Tolgoi copper and gold project in Mongolia, which promises to become one of the world’s largest mines.
The companies had turned to the arbitrator after Rio challenged a shareholders’ rights plan adopted by Ivanhoe’s board in April 2010.
The Canadian company, which was founded by Chief Executive Friedland, had argued the scheme was needed to ensure any bid would be made to all shareholders and would give its board time to explore alternatives. Rio countered it breached its rights.
The question now is when Rio will increase its stake. It has, after all, steadily increased its holding to the maximum allowable from 19.7% at the start of 2010.
Consider, however, that Rio already is the operator of Oyu Tolgoi despite Ivanhoe being the owner with its 66% interest. Mongolia’s government holds the remaining 34%.
Rio also is committed to funding its share of the development of the operations in Mongolia, something few other companies are in a position to do — or would want to, given Rio’s position.
Rio’s 49% stake also gives it effective control of Ivanhoe’s board. It had previously agreed not to exercise its voting rights to increase its representation on the board before Jan. 18.
Together, it suggests Rio doesn’t need to increase its holding at a time when it is busy investing in its existing operations and completing other acquisitions, including that of Canadian uranium prospector Hathor Exploration. Unless, of course, Ivanhoe’s share price hits a bump.
Follow the Australian bureau on Twitter @WSJAustralia
An independent arbitrator in a dispute between the mining companies has ruled that Rio is protected from having its 49% stake in Ivanhoe diluted should any bid for Ivanhoe from Rio or anyone else trigger a poison pill defense adopted by Ivanhoe’s board last year.
The decision effectively leaves Rio free to increase its stake in Ivanhoe after Jan. 18, when a five-year-old pact between the companies capping its investment at 49% expires. At stake is the massive Oyu Tolgoi copper and gold project in Mongolia, which promises to become one of the world’s largest mines.
The companies had turned to the arbitrator after Rio challenged a shareholders’ rights plan adopted by Ivanhoe’s board in April 2010.
The Canadian company, which was founded by Chief Executive Friedland, had argued the scheme was needed to ensure any bid would be made to all shareholders and would give its board time to explore alternatives. Rio countered it breached its rights.
The question now is when Rio will increase its stake. It has, after all, steadily increased its holding to the maximum allowable from 19.7% at the start of 2010.
Consider, however, that Rio already is the operator of Oyu Tolgoi despite Ivanhoe being the owner with its 66% interest. Mongolia’s government holds the remaining 34%.
Rio also is committed to funding its share of the development of the operations in Mongolia, something few other companies are in a position to do — or would want to, given Rio’s position.
Rio’s 49% stake also gives it effective control of Ivanhoe’s board. It had previously agreed not to exercise its voting rights to increase its representation on the board before Jan. 18.
Together, it suggests Rio doesn’t need to increase its holding at a time when it is busy investing in its existing operations and completing other acquisitions, including that of Canadian uranium prospector Hathor Exploration. Unless, of course, Ivanhoe’s share price hits a bump.
Follow the Australian bureau on Twitter @WSJAustralia
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