ICVL has muscle for Riversdale bid: Coal India

An Indian state consortium has the financial strength to fund a possible rival bid for Africa-focused coal miner Riversdale, the chairman of one of the group's members said on Friday.

Anglo-Australian miner Rio Tinto offered $3.9 billion on Thursday to buy Riversdale in an agreed deal as it seeks secure coking coal reserves sought after by steelmakers.

Partha Bhattacharyya, chairman of Coal India, said the consortium, International Coal Ventures Ltd (ICVL), was awaiting a recommendation from its adviser Citigroup on whether to bid.

"All the companies in ICVL are strong financially. Funding will not be a problem," said.

Bhattacharyya also said ICVL was not in formal talks with India's Tata Steel, a private-sector firm that owns 24% of Riversdale and  is its largest shareholder.

However, a source familiar with the matter said on Friday, "everyone is  talking to everyone," when asked whether ICVL and Tata Steel were in talks to form an alliance.

The person said talks included the possibility of a joint bid for Riversdale or support from Tata Steel for an ICVL bid.

ICVL consists of utility NTPC, Steel Authority of India Ltd, iron ore miner NMDC, Coal India and steelmaker Rashtriya Ispat Nigam Ltd.

Late on Thursday the Indian group hired Citigroup to conduct due diligence on Riversdale, with a report to be submitted in two weeks and a decision on whether to bid within a month, Bhattacharyya said.

"Citi's mandate is to tell us whether we should consider a bid higher than $3.9 billion," he said.

The four listed state firms in the consortium held combined cash reserves of around 440 billion rupees ($9.8 billion) as of the end of September, although all four also have ambitious expansion or acquisition plans.

Indian steel, power and coal companies are scouting for overseas coal mines to satisfy demand from the fast-growing economy, Asia''s third-largest.

Riversdale, with coking coal reserves in Mozambique, is an attractive asset for companies seeking to secure coking coal reserves amid soaring Asian  demand for the key steel-making ingredient.

Riversdale's Benga project could be expanded by a further 6 million tonnes a year for 20 years, which would raise the value of Riversdale shares to  $20.80 each, a report by Commonwealth Bank of Australia said -- well above  Rio's A$16 per share offer.                                                                                   

Analysts in India have said Tata Steel, the world's seventh-largest steelmaker, should hold on to its stake in Riversdale to assure coal supplies for its Corus unit, which does not have any captive raw material supplies.

However, the company is burdened with debt of about $10 billion, which limits its flexibility.

Teaming up with the state consortium, meanwhile, might prove unwieldy given the different management and decision-making styles that separate public and private sector firms in India. Tata Steel has tie-ups with two of the consortium partners for overseas acquisitions, although neither has borne fruit.

Tata Steel's director on Riversdale's board abstained from voting on Rio's bid.

On Friday, Tata Steel said it has received shareholder approval to raise long-term funding. In November, chief financial officer Koushik Chatterjee said the company planned to raise 70 billion rupees ($1.6 billion).

The ETNow TV channel reported on Friday that Tata Steel would raise $1  billion through an equity issue with differential voting rights. The company could not immediately be reached for comment.
($1=45.1 rupees)