RIO Tinto has walked from its deal with Chinalco and is set to raise $US15 ($18.7) billion in an entitlement offer and placement, expected to be at a 40 per cent discount.
The walk out happened overnight, after reports yesterday Rio was looking at new ways to deal with its huge debt burden, and following reports its planned $US19.5 ($24.3) billion stake sale to Chinalco had collapsed.
Mallesons Stephen Jaques was advising the Chinese on the deal, with JP Morgan. Credit Susse and Morgan Stanley were advising Rio on the transaction.
Rio announced yesterday it was looking at its options to what would have been the biggest overseas investment by a Chinese company. “Some of which are at an advanced stage, for maximising shareholder value and improving the group’s capital structure,” Rio said in a statement.
The Financial Times reported Chinalco was due to walk away from the deal because the Chinese company could not reach agreement over revisions to a certain element of the deal, a $US7.2 ($8.8) billion convertible bond issue.
The Age reported Chinalco would demand that Rio pay a $US195 ($243.8) million break fee, which would spark a major spat between the two.
The FT said Rio was looking at alternatives, including a $US12 ($15) billion rights issue, and creating a joint venture with rival BHP Billiton.