Rio Investors ‘Disappointed,’ Australian Group Says

Feb. 26 (Bloomberg) -- Rio Tinto Group investors are “concerned ‘ by the company’s proposed $19.5 billion investment from Aluminum Corp. of China, the Australian Shareholders Association said. The association, a non-profit group seeking to protect investors’ rights, met with Rio executives to discuss “a number of concerns,” it said in a statement e-mailed today. Rio said Feb. 12 that state-owned Aluminum Corp., also know as Chinalco, would buy $7.2 billion of convertible bonds and acquire stakes in projects in Chile, the U.S. and Australia for $12.3 billion. The deal is subject to the approval of London-based Rio’s investors. Rio agreed to the Chinese investment to cut debt that grew 19-fold after the acquisition in 2007 of Alcan Inc. Rio rejected a Feb. 6, 2008 all-share, hostile bid from BHP Billiton Ltd., the world’s largest mining company. BHP abandoned the bid in November, citing Rio’s debt and financial market turmoil. “Rio shareholders are justifiably disappointed with events over the past 12 months,” Duncan Seddon, an association representative, said in the statement. “Now the board is proposing a deal that will hugely dilute the holdings of retail shareholders and it seems clear that Australian shareholders of the dual-listed company will have little say on the deal.” Legal & General Rio’s plan has been criticized by Legal & General Plc, the mining company’s second-largest institutional shareholder, which said Feb. 14 Rio should put forward an alternative fund-raising proposal to be considered by all investors. Shareholders were “deeply concerned” by the deal, the Association of British Insurers, representing 400 institutional investors, said Feb 13. Chinalco is Rio’s largest shareholder and would own 18 percent should it convert the debt. Rio is a so-called dual-listed company, with shares traded in London and Sydney. Australian shareholders have 22 percent of the total vote, Seddon said. It’s “inequitable” that the Chinalco deal doesn’t require approval by a majority of shareholders from both entities, he said. London-based Rio spokesman Nick Cobban declined to comment when contacted by Bloomberg news. To contact the reporter on this story: Tom Biesheuvel in London tbiesheuvel@bloomberg.net