Aussie Rio shareholders seek new Chinalco deal

MELBOURNE (Reuters) - Top Australian shareholders in Rio Tinto called for changes to the miner's planned $19.5 billion tie-up with China's state-owned Chinalco, and a newspaper reported that Chinalco will restructure the deal. The tie-up, which would give Chinalco stakes in some Rio mining assets as well as convertible notes to double its equity stake to 18 percent, has sparked concern in Australia about China's ability to influence pricing of strategic commodities. Several of Rio's big UK shareholders have also voiced opposition, saying the convertible note issue favors Chinalco at their expense, and they have pushed alternative plans that include a rights issue and a tie-up with bigger mining rival BHP Billiton. "They can revise and should revise the whole cocktail of it," said Paul Xiradis, CEO of Ausbil Dexia, the ninth-largest shareholder in Rio Tinto Ltd, according to Thomson Reuters data. Xiradis said that reflecting shareholders' complaints, the preferred route would be to have a capital raising that allowed all shareholders to take part, and he would like to keep Rio's iron ore assets in Western Australia out of the deal. Rio said on May 15 it remained committed to the China tie-up. Rio shares in London fell 1.8 percent to 2,814 pence by 0830 GMT (4:30 a.m. EDT), outperforming a 3.8 percent fall in the British mining index as copper prices declined. Rio shares ended 2.9 percent higher in Sydney. For full coverage of Rio-Chinalco, click REVISIONS SEEN INEVITABLE Five of the top 12 shareholders in Rio's Australian listed shares have kept their cards closely guarded on whether they would vote for the deal in its current form, but some say it now looks inevitable it would be revised. "It's becoming more clear that given shareholder and, seemingly, government opposition to parts of the deal, I think some of the deal will be restructured," said Matt Williams, Australian equities manager at Perpetual Investments, the seventh-largest shareholder in Rio Tinto Ltd. Another top-10 shareholder, who declined to be named, said his main concerns were the dilution from the convertible notes sale to Chinalco, and the Chinese firm's appointment of two directors to the Rio board. Williams said while shareholders might want to participate in a rights offer, Rio would not be able to raise the full amount from existing shareholders that it needs to pay half its $38 billion in debt, the main reason for the deal. If another party is brought in to fill the gap, it would have to make a much more attractive offer than Chinalco, as Rio stands to pay a $195 million break fee if it calls off the deal. "The wild card is: does BHP do something? This could be the last chance before China Inc locks away the potential of some kind of deal between the two companies ever occurring," said Williams.