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Mittal mulling entering takeover battle for Rio Tinto mining group
Lakshmi Mittal is looking at entering the takeover battle for the Rio Tinto mining group, the Financial Times reported on Monday, quoting people familiar with the situation.
- Reuters
- Published: 23:37 June 30, 2008
London: Lakshmi Mittal is looking at entering the takeover battle for the Rio Tinto mining group, the Financial Times reported on Monday, quoting people familiar with the situation.
Mittal, main shareholder in steelmaker ArcelorMittal as well as being chairman and chief executive, was keen to secure larger supplies of iron ore, said the newspaper.
Rio, one of the world's major producers, is the subject of a contested bid by Australian mining group BHP Billiton, worth about $160 billion at present share prices. The deal is being scrutinised by antitrust regulators.
An ArcelorMittal spokesman declined comment on the report.
Rio Tinto shares rose 1.4 per cent in London to 5925 pence by 0800 GMT and BHP Billion gained 1.1 per cent to 1895 pence, while ArcelorMittal stock eased 0.8 per cent in Amsterdam to 63.15 euros.
The Financial Times said Mittal's thinking emerged as his adviser Goldman Sachs announced he had joined the board of the Wall Street bank.
"Mittal has considered some involvement in the takeover, such as the idea of taking a stake in Rio through buying from existing shareholders," it quoted an unnamed banker as saying.
"On the other hand, he could wait until later, when quite possibly some of the iron ore assets (of Rio) go on sale as a result of demands by antitrust regulators," said the banker.
The Financial Times said bankers believed Rio's iron ore assets were currently worth about $50 billion. But this figure could fall sharply in the next few months, particularly if the boom in steelmaking starts to peter out.
Malay Mukherjee, a member of ArcelorMittal's six-person management board, said in April that the company aimed to supply up to 70 per cent of its own iron ore needs by 2012 to protect itself against surging raw material prices.
This would lift its self sufficiency of the iron feedstock from 45 per cent now as the company seeks to boost its steel production 18 per cent to 130 million tonnes per year by 2012.
Iron ore prices have rocketed, jumping about 70 per cent in the 2008-2009 contract year, amid strong demand for steel. Rising costs for raw materials such as iron ore and coal are expected to dent the earnings of global steelmakers this year.
Mukherjee said at the time his group's raw material expansion plans could be achieved with additional investments.
Most of this growth would be organic through expansion of ArcelorMittal's existing operations in emerging markets including China, Russia, and Brazil. The company was also planning greenfield expansion in India.
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