MELBOURNE Global miner Rio Tinto (RIO.AX) has extended its $3.9 billion takeover offer for Mozambique-focused coal miner Riversdale Mining RIV.AX to March 4, amid signs that Riversdale's second-biggest shareholder was holding up a deal.
The two-week extension came the same day that CSN (CSNA3.SA), Brazil's biggest steelmaking group, raised its stake in Riversdale to 19.9 percent, just below the threshold for making a compulsory takeover offer.
Riversdale's shares fell to a low of A$15.77 and last traded flat at A$15.85, a 1 percent discount to Rio Tinto's offer of A$16 a share, indicating that investors are not expecting CSN to mount a counterbid.
Instead investors appear to be concerned that Rio Tinto may not get to its minimum acceptance condition of 50.1 percent, without the support of CSN.
"The concern in the market will be that Rio will just walk away," said Hayden Bairstow, resources analyst at CLSA.
Rio Tinto reiterated that Riversdale had said no other offer had emerged.
CSN, Riversdale's second-largest shareholder behind India's Tata Steel (TISC.BO), has not said what its intentions are, but investors and industry experts speculate its main aim is to bolster its bargaining position with Rio Tinto to secure coal supplies.
CSN has a warchest of $7 billion for acquisitions and has been on the prowl for targets in logistics, mining and cement.
But when it first bought into Riversdale it said its main interest was in locking in coking coal supply for its steel mills, so analysts and insiders have been playing down any ideas that CSN may be looking to make a bid.
"Increasing its stake could be more a strategy to put pressure on Rio to raise its offer price," said Gregory Lafitte, an Asian merger arbitrage trader at LCM.
Rio Tinto has been talking to Tata Steel and CSN, but neither steel maker has said yet whether it will accept Rio's offer.
The only indication of Tata Steel's position is that its representative on Riversdale's board, N.K.Misra, backed Rio Tinto's offer.
Given that Misra is Tata's head of mergers and acquisitions, his recommendation of Rio Tinto's bid at least makes it clear that Tata Steel itself is not planning to bid against Rio Tinto.
But it is still not clear whether Tata Steel or CSN are holding out for a higher offer.
Investors are hoping for more clarity when Rio Tinto releases its results after the Australian market closes on Thursday.
(Editing by Ed Davies)