Rio Tinto Makes $38.1B Cash Offer For Alcan

Rio Tinto shook off its reputation for conservatism with a $38.1 billion recommended offer for Canada’s Alcan, the biggest takeover deal yet in the consolidating global mining industry. A rally in metals prices, driven by consumption from emerging economies such as China and India, has made mining companies cash-rich and encouraged some significant deals. But Rio’s bid is a step up in scale, and could set a new benchmark for the next round of consolidation, analysts said. The Anglo-Australian miner trumped the hostile $76.03-a-share offer from U.S. aluminum giant Alcoa with an all-cash offer of $101 a share, which analysts said is a full price and a big vote of confidence in the commodities boom. Until now Rio Tinto has sat out the sector consolidation, but with this bid, new Chief Executive Tom Albanese — widely seen as deal maker — has confirmed a more aggressive stance for the miner. Albanese said the outlook for aluminum demand is strong, with global growth of 6% a year forecast through 2011 and Chinese demand set to grow by 15% a year. If successful, the Alcan deal will diversify Rio Tinto’s earnings stream that has become heavily weighted to the key iron ore and copper divisions, which together provided 76% of the miner’s 2006 earnings.