Aluminum Corporation of China (Chinalco) and US firm Alcoa sprung a surprise raid on Australian mining group Rio Tinto in late January, snapping up enough of the firm’s London-listed shares for an overall stake of 9%.
The US$14 billion deal is far and away the largest overseas acquisition by a Chinese firm, and documents later revealed that the two firms were willing to spend up to US$24 billion for a 14.9% stake. The move was widely viewed as an attempt to derail Anglo-Australian BHP Billiton’s unsolicited US$119 billion takeover bid of Rio Tinto.
However, Chinalco chairman Xiao Yaqing insisted that the timing was “coincidental.”
The purchase may have been driven by Chinese fears that a BHP takeover would give the BHP-Rio behemoth a virtual monopoly on iron ore supplies being gobbled up by China’s steelmakers. That China Development Bank, one of the country’s policy lenders, partly financed the deal lends credence to the idea that Chinalco was acting both in self-interest and national interest.
Australian Prime Minister Kevin Rudd said that “national interest” implications will be considered should Chinalco and Alcoa seek to raise their stake.
Shares of Chalco, the Hong Kong-listed arm of Chinalco, fell by up to 10% in mid-February after BHP Billiton sweetened its bid for Rio to the tune of US$147.4 billion, which was ultimately rejected. Chalco shares later spiked following talk of potential cooperation between Chinalco and Rio as well as rumors that the Chinese and US investors might raise a stake in Rio as high as 20%.