INSTANT VIEW: Rio Tinto scraps Chinalco deal, in JV with BHP

SYDNEY (Reuters) - Rio Tinto Ltd/Plc scrapped its planned $19.5 billion tie-up with Chinese state-owned metals firm Chinalco, instead launching a heavily discounted $15.2 billion right issue and combining its Australian iron ore mines with rival BHP Billiton.

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COMMENTARY:

ROSS BARKER, MANAGING DIRECTOR, AUSTRALIAN FOUNDATION

INVESTMENT

"I'm pleased they've announced it. It makes sense for both parties to realize the synergies. We were not supporters of the Chinalco transaction. We're happy to see this alternative approach to solving Rio's issues with its debt.

"I think that the Chinese will accept it and move on. They're going to have to live with each other. I don't think, given what's happened in markets, the terms of the (Chinalco) transaction were going to survive."

BARNABY JOYCE, NATIONALS SENATOR

"It is great for the Australian people that this deal falls over and we do not have the complications of the Communist People's Republic of China's government owning the wealth of Australia.

"This would, obviously, be to the benefit of the Chinese people ... but it would have been to the detriment of the Australian people," he told reporters in Canberra.

ROB HOOK, FUND MANAGER, S.G. HISCOCK "Chinalco won't be happy with it, but maybe they asked for too much to begin with and that is where probably the deal fell through. The market has changed and probably Chinalco did not want to go along with a different deal. This is a very good deal for both BHP and Rio.

"I don't think there will be any competition issues here or in Europe."

TIM SCHROEDERS, PORTFOLIO MANAGER, PENGANA CAPITAL

"The equity raising removes a lot of uncertainties about the future of the company and whether it would have received FIRB approval for the deal with Chinalco. It definitely allows flexibility moving forward in terms of opportunities in addressing the balance sheet.

"The price is there to ensure it gets done. It seems a big discount but it does not really matter because it is only impacting existing shareholders. I think it is a good deal for Rio Tinto, in conjunction with the joint venture with BHP on iron ore."

JONATHAN BARRATT, MANAGING DIRECTOR, COMMODITY BROKING