The effect on Riversdale’s share price was immediate, sinking by 2.2% on Friday morning to $15.88 and below Rio’s $16 per share offer.
The decision is good news for Rio, which is keen to increase its mix of coking coal product and to establish a strong footprint in an emerging coal province of Mozambique.
International Coal Ventures, which appointed Citi to advise it on any transaction, met on Thursday but decided against putting in a bid.
ICVL, which is a joint venture between state coal body Coal India, Steel Authority of India, iron ore miner NMDC, power company NTPC and steel company RINL, had earlier indicated it would consider a counter-bid for Riversdale to secure strategic supplies of coking coal from Mozambique, which is expected to become the world’s biggest supplier of coking coal after Australia by 2025.
"We did not think it was an appropriate case to bid higher than Rio's offer," Reuters quoted Coal India chairman Partha Bhattacharya as saying.
The consortium was scouting for coal assets in other countries.
Riversdale's board – including a representative from Indian steel group Tata Steel – has unanimously recommended Rio’s bid. Tata Steel holds a 23.6% share in Riversdale along with a direct 25% stake in the company’s Benga project.
No superior proposal has been received by Riversdale and the company is not aware of any party having an intention to make such a proposal, its directors said in Riversdale’s target statement on Monday.
Executive chairman Michael O’Keefe, managing director Steve Mallyon and chief financial officer Niall Lenahan have already signed off on pre-bid documents.
