Economy

Markets

Industries

Insights

Reports

Events

Chinalco's roadblocks decreasing

By Jiang Wei (China Daily)
Updated: 2009-04-03 07:56

Aluminum Corp of China (Chinalco) has won approval from the German government for its proposed investment in global mining giant Rio Tinto Group, clearing the second hurdle for the deal.

Related readings:  Rio Tinto chief backs stake buy  Rio Tinto may sell more assets if Chinalco deal fails  Chinalco deal gets initial nod  Australia competition body won't block Rio-Chinalco

The German Federal Cartel Office had found no anti-competitive element to the proposed investment by Chinalco, said the London-based Rio Tinto, which has significant business in Germany. It is the second nod from relevant regulators after the approval from the Australian Competition and Consumer Commission.

The proposed $19.5-billion investment has still to be approved by Rio Tinto's shareholders and regulators in China, the US as well as Australia, where Chinalco and Rio Tinto have substantial operations.

Chinalco offered to invest $12.3 billion in Rio Tinto's aluminum, copper and iron ore mines and spend another $7.2 billion on convertible bonds in the company. If all approvals come through, the investment will double Chinalco's existing 9.3 percent stake in Rio Tinto Group to 18 percent.

Chinalco declined to comment on the process yesterday but President Xiong Weiping told an earlier press conference in Hong Kong he was confident of the company's investment in Rio Tinto getting clearance from Australia's Foreign Investment Review Board, the key approver of the deal.

"I've been in office more than a month and as far as I know Chinalco does not have a plan B (in a reference to Rio Tinto's alternative plan). But of course, we have a draft plan for the best and worst case scenarios," he said.

The Review Board and Australia's Treasurer Wayne Swan are expected to announce by June whether they approve the deal.

The proposal is backed by Rio Tinto's board, which expects to reduce the company's $40 billion in debt, and has won support from some major shareholders.

The Sydney Morning Herald yesterday quoted Aberdeen Asset Management's global head of equities, Hugh Young, as saying that the deal was "clever" for Rio Tinto. Aberdeen is a major shareholder of Rio Tinto.

"We actually got a good deal and Chinalco does not threaten national security or anything like that," Young told reporters during a visit to Australia. "So, I think it is good for Australia and should be welcomed."