Ivanhoe plans to make way for Rio takeover

Asia Pacific-focused company Ivanhoe Mines, has announced plans to dispose of its shareholder rights plan, a move which will leave the door wide open for mining giant Rio Tinto to up its already sizeable stake in the firm and gain control of the Mongolian Oyu Tolgoi copper-gold mine.

By MoneyWeek

published 19 January 2012

in Features

Rio's 49% restriction, which has been in place since 2006, came to an end on Wednesday, and according to Ivanhoe, Rio has made clear its plans to increase its share in the firm above 50%, irrespective of the shareholder plan.

Ivanhoe's Chairman David Huberman said that the interests of shareholders and the company's strategic objectives would be best served by the termination of the rights plan.

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As reported on by Bloomberg, Prasad Patkar, who helps manage a portfolio worth about $1bn, including Rio shares, at Platypus Asset Management, said: "Rio's first step would be to go past 50% and that's the urgency.

"From a shareholder's point of view, you'd prefer them not to go hostile so that there's no risk of overpaying, so the creep aspect is clearly better," Patkar said.

Rio has long had its eye on the Oyu Tolgoi mine, which is one of the world's largest untapped and which Rio believes will cost $6bn to develop.

Patkar also said it was unlikely that a third party will bid for Ivanhoe.

Rio Tinto's share price rose 0.71% to 3,737p by 14:06.