Demerger plan could net Rio Tinto £650m
Miner considers loading debt on to Australian spin-off company
Mark Leftly is political correspondent at The Independent on Sunday and associate business editor across the Independent titles. He writes a weekly column, Parliamentary Business, published on a Wednesday, that covers politics and the City. He is a multi-award winning reporter and was named Press Gazette's business magazine journalist of the year prior to joining The Independent on Sunday.
Sunday 15 April 2012
Rio Tinto looks set to earn itself a £650m payday by loading debt onto its Antipodean aluminium smelters business.
The FTSE 100 miner has been reviewing the spin-off of the assets, which are run under the "Pacific Aluminium" banner, since October. Rio's aluminium operations have hurt the miner's finances in recent years.
Rio had hoped to raise money through selling shares in the subsidiary through a flotation, but it is thought that advisers Credit Suisse and Morgan Stanley have cooled on that idea.
Though economic conditions make a separate listing difficult, Rio Tinto is warming to a plan that would see a demerger of the business. This would result in a separate company quoted in Australia, with possibly a secondary listing in London, that would be owned by Rio's existing shareholders.
Though Rio chief executive Tom Albanese would not raise funds directly this way, he could load up to Aus$1bn (£650m) of debt onto Pacific Aluminium. This would reduce the value of the demerged business from an estimated Aus$5bn to Aus$4bn, but the debt would be used to pay Rio a one-off Aus$1bn special dividend.
It is thought that Rio would look for the demerger to happen in September this year. A source close to the company said: "Aus$1bn would be at the top end of what could be put on to Pacific Aluminium. But a demerger that creates a new public company is the base case, probably right at the end of the third quarter."
Falls in the price of aluminium has been the bane of Rio since it bought Canada's Alcan for US$38.1bn (£24bn) in 2007; billions have been written off as a result of the deal's poor timing. A spin-off of Pacific Aluminium, which includes a refinery and an unprofitable bauxite mine as well as smelters, would help clean-up the division.
A Rio spokeswoman said: "We are not in a hurry to divest these assets. It is maybe a case of waiting until the economic climate improves."
Mr Albanese might well be asked to update shareholders on these plans at the company's annual meeting this week. They will also be hoping for news on Rio's diamond business, which the board put up for review last month. Great rival BHP Billiton is also mulling a sale of its diamond operations, but potential buyers for either are thought to be few and far between. One possibility might be to merge the two diamond business, creating an industry champion.
Also holding an AGM this week is another great name in mining, Anglo American. This will give its board the opportunity to assess the mood of shareholders towards chief executive Cynthia Carroll.
- 1 Labour rallies behind Flint as deputy leader to offset a Corbyn win
- 2 Katie Hopkins reveals fear she will die during brain surgery to cure epilepsy
- 3 The difference between a psychopath and a sociopath
- 4 Dutch King Willem-Alexander declares the end of the welfare state
- 5 'Cool kids' can go on to become losers in later life, study finds
Katie Hopkins reveals fear she will die during brain surgery to cure epilepsy
Labour rallies behind Flint as deputy leader to offset a Corbyn win
Kim Jong-un is awarded global statesmanship prize by Indonesia
Dutch King Willem-Alexander declares the end of the welfare state
Calais crisis: Migrants that have made it to the UK reveal how Britain has matched their expectations
Yvette Cooper: Our choice is years of Tory rule under Jeremy Corbyn – or a return to a Labour government
Is Britain really full up? Are migrants taking our jobs? Leading academic answers the most common anti-immigration claims
Calais Migrant Crisis: Deputy Mayor of Calais labels Cameron's use of 'swarm' as 'racist' and 'ignorant'
While we fixate on Calais, the Home Office is quietly deporting dozens of migrants on 'ghost flights'
Calais crisis: The seven claims made about the migrants - and the reality
Calais crisis: For desperate migrants it is 'England or death' as they brave dogs, riot police and speeding trains
iJobs Money & Business
£30000 - £35000 per annum: Recruitment Genius: This is an exciting opportunity...
£13000 - £15000 per annum: Recruitment Genius: Are you passionate about custom...
£22000 - £25000 per annum: Recruitment Genius: Main purpose: Under the directi...
£35000 - £37000 per annum + benefits : Ashdown Group: Contracts Manager - City...