Thu, June 11, 2009
Business > Industries > Chinese firms' global move

News Analysis: Rio Tinto scraps marriage with Chinalco

2009-06-09 08:24:27 GMT2009-06-09 16:24:27 (Beijing Time)  Xinhua English

CANBERRA, June 9 (Xinhua) -- The unilateral scrap of its marriage with Aluminum Corp. of China, or Chinalco, last Friday by Australia's Rio Tinto was a "stunning" news to most of the Chinese who have been eyeing on the progress each day on the hopeful transaction, Chinalco president Xiong Weiping told Xinhua Friday in an exclusive interview in Canberra.

He said that no one had been as sincere as Chinalco in promoting the transaction after the news of inking an agreement with Rio Tinto came out in February. But Rio Tinto has eventually been proved that it has been cheating in the marriage.

When the dust settled, the president said, a retrospection was required from the very beginning to the end of Chinalco's bitter engagement.

First, he said, "Rio Tinto failed our expectation as the Chinese saying goes that 'A friend in need is a friend in deed.'"

When Rio Tinto first came to Chinalco desperately seeking help for easing its debt-driven disaster, Chinalco has made no hesitation to offer it a 19.5-billion-U.S. dollar plan, a biggest ever one in terms of amount, with much more favorite and generosity than any other investment outside Australia.

"Chinalco has worked hard to respond constructively and engage with Rio Tinto to make appropriate amendments to the transaction terms announced in February to better reflect the changed market background and feedback from shareholders and regulators," Xiong said.

However, Chinalco, a sincere player, turned out to be a loser in the game when Rio Tinto joined hands with its long-time rival BHP Billiton who had been trying to catch the fish fruitlessly for over 10 years.

"As a result, we are very disappointed with this outcome," the president said. "We have already funded 21 billion U.S. dollars for the transaction."

Second, Rio Tinto's ability to say "bye bye" to Chinalco and "hello" to BHP overnight cast doubt on whether government indications were behind the curtain.

The Australian reported Saturday "It is believed Rio would have embarked on the rights issue even without the BHP deal, with the Chinalco rescue package facing growing opposition from shareholders, and the Rudd government also privately voicing concerns."

"We have received extensive feedback from shareholders, and some from regulators, expressing concerns about the (Chinalco) transaction as structured," Rio chairman Jan du Plessis said Friday.

The duration of case review was lengthened from 30 days to 90 days by the Foreign Investment Review Board which "accidentally" allows precious time for Rio to find other channels to ease its debt in this "time is money" era. "There can be no question that the Foreign Investment Review Board wanted changes to Rio's arrangements with Chinalco," said the Australian.

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