Why the Proposed CHINALCO Investment in Rio Tinto Failed

Xueli Huang and Ian Austin

Chapter 6 in Chinese Investment in Australia, 2011, pp 140-174 from Palgrave Macmillan

Abstract: Abstract On 12 February 2009, the board of Rio Tinto (“Rio” hereafter) announced that it had struck a deal of $19.5 billion with CHINALCO. This was by far the largest deal in Chinese and Australian corporate history. If this transaction was successful, the deal could deliver great strategic and financial benefits to CHINALCO and Rio, such as helping Rio to meet its $18.9 billion debt maturities before October 2010. This would enhance Rio’s ability to obtain further funds for major project development, increasing CHINALCO’s share in the Rio Tinto Group from 9 per cent to 18 per cent for a relatively low price. Strategically, the partnership between Rio and CHINALCO could leverage the complementary strength of both parties, particularly CHINALCO’s ability in delivering infrastructure projects and Rio’s operational efficiency. Nevertheless, Rio informed CHINALCO on 5 June 2009 that it had terminated the agreed deal and would pay CHINALCO the agreed break fee of $195 million. This was only ten days before the due date for Australia’s FIRB to make its decision on CHINALCO’s investment application and 114 days after the deal announcement.

Keywords: Strategic Alliance; Free Trade Agreement; Australian Government; Economic Rent; Debt Maturity (search for similar items in EconPapers)
Date: 2011
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-31415-3_6

Ordering information: This item can be ordered from
http://www.palgrave.com/9780230314153

DOI: 10.1057/9780230314153_6

Access Statistics for this chapter

More chapters in Palgrave Macmillan Books from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().