Pt 1. Fully underwritten Righ

RNS Number : 4287T

Rio Tinto PLC

05 June 2009

 



The Boards of Rio Tinto plc and Rio Tinto Limited announce fully underwritten Rights Issues to raise gross proceeds of approximately US$15.2 billion

5 June 2009

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES, CANADA, THE PEOPLE'S REPUBLIC OF CHINA, HONG KONG SAR, JAPAN, PAPUA NEW GUINEA, SINGAPORE, THE REPUBLIC OF SOUTH AFRICA OR SWITZERLAND OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION.

Agreed terms with BHP Billiton for a 50:50 joint venture in Western Australian iron ore production

Previously announced Chinalco transaction terminated but Rio Tinto sees potential for future collaboration

Highlights of the Rights Issues

Rights Issues consisting of 21 New Rio Tinto plc Shares offered for every 40 existing shares at 1,400 pence per share and 21 New Rio Tinto Limited Shares offered for every 40 existing shares at A$28.29 per share to raise approximately US$15.2 billion of gross proceeds, comprising approximately US$11.8 billion for Rio Tinto plc and approximately US$3.4 billion for Rio Tinto Limited. 

• The Rights Issues will enable the Group to meet its Alcan facility debt repayment obligations fully in 2009 and substantially in 2010.

• As a result net debt will be reduced to approximately US$23.2 billion; exceeding the commitment made in December 2008 to reduce net debt by US$10 billion by the end of 2009.

• The Rights Issues and debt repayments will strengthen the Group's financial position in a period of continuing uncertainty and allow it to take advantage of future value-creating opportunities. 

• The subscription prices represent discounts of approximately 38.2% and 47.2% to the theoretical ex-rights prices (TERPs) of 2,265.6 pence and A$53.61 per New Rio Tinto plc Share and Rio Tinto Limited Share respectively; and discounts of approximately 48.5% and 57.7% to the Closing Prices of Rio Tinto plc and Rio Tinto Limited on 4 June 2009; respectively.

 Agreement with BHP Billiton

In addition, Rio Tinto and BHP Billiton today announced that they have signed a non-binding agreement to establish a production joint venture encompassing the entirety of both companies' Western Australian iron ore assets. The joint venture will include all current and future Western Australian iron ore assets and liabilities and will be 50:50 owned by Rio Tinto and BHP Billiton. In order to equalise the contribution value of the two companies, BHP Billiton will pay Rio Tinto US$5.8 billion for equity-type interests at financial closing. The establishment of the joint venture will be subject to execution of binding agreements as well as regulatory and shareholder approvals. The agreement signed today includes binding obligations on both parties regarding exclusivity and payment, in certain circumstances, of a break fee if the transaction does not complete.

Further details of the proposed joint venture with BHP Billiton are set out in a Rio Tinto press release dated today which can be found on Rio Tinto's website.  

Update on Chinalco Transaction

The transaction announced and recommended by the Boards will no longer be pursued. Rio Tinto and Chinalco have discussed potential amendments to the transaction to address the improved financial markets; as well as shareholder and wider stakeholder feedback. Despite making good progress, a revised version of the original agreement has not been realised and those discussions have now ceased. As a result the Boards have withdrawn their recommendations for the original transaction and Rio Tinto has terminated the agreement.  Rio Tinto will pay Chinalco the agreed break fee of US$195 million.

Rio Tinto remains interested in potential future collaboration with Chinalco and continues to recognise the importance of China and building strong relationships there.

Jan du Plessis, Chairman of Rio Tinto said,

'Since we announced the Chinalco transaction in early February, financial markets have seen a significant improvement. This has had two consequences - firstly, the financial terms of the Chinalco transaction became markedly less valuable and, secondly our ability to raise a level of equity appropriate for our needs on attractive terms has improved very considerably.  

'In parallel, we had the opportunity to engage with BHP Billiton about the possibility of establishing a highly attractive Western Australian iron ore production joint venture that would deliver substantial value to shareholders.

'Given these new circumstances, and coupled with the extensive feedback we have had from shareholders and others, the Boards have concluded that the formation of an iron ore production joint venture in Western Australia with BHP Billiton together with the Rights Issues deliver the best solution. This course of action will assist us to address Rio Tinto's short- and medium-term debt repayment obligations whilst enabling us to retain strategic flexibility, and to preserve and grow long-term shareholder value.

'Over recent weeks we were also endeavouring to achieve a new agreement with Chinalco. We were disappointed that we were unable to find a solution acceptable to both sides, but we believe we have established a good relationship with Chinalco and we remain very positive about the potential for future collaboration.'

Tom Albanese, Chief Executive of Rio Tinto said,

'At the end of 2008, the Group announced a debt reduction programme aimed at improving its financial position and the Rights Issues, along with the initiatives we announced at that time are designed to enable the Group to improve its financial position, enhance liquidity, support our goal of restoring our long-term credit rating to single A and increase our strategic flexibility. In addition, in the first quarter of 2009, we also announced agreed divestments totalling US$2.5 billion and in April we took advantage of the opening of the bond markets to raise US$3.5 billion.

'We believe that the long term demand outlook for our products remains strong based on fundamental economic and demographic trends. However, the global economic downturn and the difficult trading conditions experienced, particularly in iron ore and aluminium, have adversely impacted our near-term cash flows and broader financial position. 

By strengthening our balance sheet through the Rights Issues and other initiatives, the Boards believe we will be better positioned to respond rapidly to an improvement in market conditions with the opportunity to use future cash flows to invest in growth projects.' 

Rights Issues

Due to the Group's dual-listed structure, the capital raisings are being structured as two inter-conditional Rights Issues, with Qualifying Rio Tinto plc and Qualifying Rio Tinto Ltd shareholders being offered 21 New Rio Tinto plc Shares or New Rio Tinto Limited Shares for every 40 Existing Rio Tinto plc Shares or Existing Rio Tinto Limited Shares held, as applicable. The Rights Issues are fully underwritten, subject to customary terms and conditions, and are expected to raise gross proceeds of approximately US$15.2 billion, with approximately US$11.8 billion expected to be raised by the Rio Tinto plc Rights Issue and approximately US$3.4 billion by the Rio Tinto Ltd Rights Issue.

The subscription prices of 1,400 pence per New Rio Tinto plc Share and A$28.29 per New Rio Tinto Limited Share are based on an equivalent price per New Rio Tinto plc Share and per New Rio Tinto Limited Share of US$22.94 converted into pound sterling and Australian dollars at the exchange rates published in the London edition of the Financial Times on 4 June 2009. The subscription prices represent a discount of approximately 38.2% and 47.2% to the theoretical ex-rights prices (TERPs) of 2,265.6 pence and A$53.61 per Rio Tinto plc Share and Rio Tinto Limited Share respectively, and a discount of approximately 48.5% and 57.7% to the Closing Prices on 4 June 2009 of Rio Tinto plc and Rio Tinto Limited respectively.

The Rights Issues are being undertaken using a traditional structure with a rights trading period.

The Boards intend to apply the net proceeds in the mandatory prepayment of the tranches of the Alcan credit facilities due in October 2009 (as at 30 April 2009, US$7.15 billion was drawn under this tranche) and in October 2010 (as at 30 April 2009, US$8.1billion was drawn under this tranche). 

 Dividends

In light of the current uncertainties in relation to the macroeconomic outlook, the Boards have decided that it would not be appropriate to pay an interim dividend for the current financial year. It will be our intention to pay a final dividend for the current financial year subject to satisfactory trading results. The Group expects that the total cash dividend payment for the 2010 financial year will be at least equal to that paid for 2008 (US$1.75 billion). The Group remains committed to a progressive dividend policy over the longer-term.

Credit Suisse Securities (Europe) Limited, J.P. Morgan Cazenove Limited and Macquarie Capital (Europe) Limited are acting as joint global co-ordinators.

Credit Suisse Securities (Europe) Limited and J.P. Morgan Cazenove Limited are acting as joint sponsors and corporate brokers with respect to the Rights Issue for Rio Tinto plc. The Rights Issue for Rio Tinto plc is fully underwritten by Credit Suisse Securities (Europe) Limited, J.P. Morgan Securities Ltd. on behalf of its affiliate J.P. Morgan Cazenove, Deutsche Bank AG, London branch and Morgan Stanley & Co International plc as joint bookrunners and Macquarie Capital (Europe) Limited, RBS Hoare Govett Limited and Société Générale as co-bookrunners.

The public Rights Issue for Rio Tinto Limited is fully underwritten by Credit Suisse Securities (Australia) Limited, J.P. Morgan Australia Limited, Macquarie Capital Advisers Limited and RBS Equity Capital Markets (Australia) Limited as joint bookrunners and Deutsche Bank AG, Sydney branch, Morgan Stanley Australia Securities Limited and Société Générale as co-bookrunners

A prospectus relating to the Rights Issues, prepared in compliance with UK regulatory requirements will be available on Rio Tinto's website, www.riotinto.com in due course and will contain further details and the full terms and conditions of the Rights Issues. In Australia, the Rio Tinto Limited Rights Issue will be made under provisions of the Corporations Act which allow rights issues to be made without a prospectus. An Australian offer document, which will contain the full terms and conditions of the Rio Tinto Limited Rights Issue, will also be made available on Rio Tinto's website. Neither the Prospectus nor the Offer Document will constitute a prospectus for the purposes of the Corporations Act.

 For further information, please contact:

Rio Tinto Media Relations, London  Nick Cobban Office:  [phone] Mobile: [phone] Christina Mills Office: [phone] Mobile: [phone]	Media Relations, Australia  Amanda Buckley Office:  [phone] Mobile: [phone] Ian Head Office: [phone] Mobile: [phone]
Media Relations, Americas Tony Shaffer Office:  [phone] Mobile: [phone]
Investor Relations, London Nigel Jones Office:   [phone]  Mobile: [phone] David Ovington Office:  [phone] Mobile: [phone]	Investor Relations, Australia Dave Skinner Office:  [phone] Mobile: [phone] Simon Ellinor Office:  [phone] Mobile: [phone] Investor Relations, North America Jason Combes Office:  [phone] Mobile: [phone]
Credit Suisse James Leigh-Pemberton,  Tristan Lovegrove Office: [phone]	J.P. Morgan Cazenove  Charles Harman, Adam Brett, Jonathan Wilcox Office:  [phone]
Macquarie  Geoff Joyce, Neil Watson Office: [phone]

Email:  

[e-mail]

Websites:  

www.riotinto.com 

High resolution photographs available at: www.newscast.co.uk

This announcement is an advertisement. It is not a prospectus, disclosure document or offering document under Australian law, the laws of England and Wales or any other law and does not purport to be complete. Investors should not subscribe for or purchase any Rio Tinto plc Rights, Rio Tinto plc Provisional Allotment Letter, or New Rio Tinto plc Shares or New Rio Tinto Limited Shares referred to in this announcement except on the basis of information in the prospectus to be published by Rio Tinto plc and Rio Tinto Limited (together, “Rio Tinto”) in due course in connection with the rights issues (the “Prospectus”). The Prospectus will, following publication, be available on Rio Tinto’s website for information purposes only. In the case of the Rio Tinto Limited rights issue, investors outside Australia and New Zealand should not subscribe for or purchase any Rio Tinto Limited Rights or New Rio Tinto Limited Shares referred to in this announcement except on the basis of information in the Prospectus. Offers will be made to investors within Australia and New Zealand under an Australian offer document to be dispatched in due course. This announcement does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to acquire, the Rio Tinto plc Nil Paid Rights, Rio Tinto plc Fully Paid Rights, Rio Tinto Limited Rights, Rio Tinto plc Provisional Allotment Letter, Rio Tinto Limited Entitlement and Acceptance Forms or New Rio Tinto plc Shares or New Rio Tinto Limited Shares offered by any person in any jurisdiction in which such an offer or solicitation is unlawful. Any decision to participate in the Rights Issues or to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of any securities should only be made on the basis of information contained in the Prospectus when it is published in due course, which will contain further information relating to the issuer as well as a summary of the risk factors to which any investment is subject.

 

This announcement and the information contained herein do not contain or constitute an offer for sale or the solicitation of an offer to purchase securities in the United States. The Rio Tinto plc Nil Paid Rights, Rio Tinto plc Fully Paid Rights, Rio Tinto Limited Rights, Rio Tinto plc Provisional Allotment Letter, Rio Tinto Limited Entitlement and Acceptance Forms or New Rio Tinto plc Shares or New Rio Tinto Limited Shares referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold in the United States absent registration under the Securities Act or an available exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. There will be no public offer of the Rio Tinto plc Nil Paid Rights, Rio Tinto plc Fully Paid Rights, Rio Tinto Limited Rights, Rio Tinto plc Provisional Allotment Letter, Rio Tinto Limited Entitlement and Acceptance Forms or New Rio Tinto plc Shares or New Rio Tinto Limited Shares in the United States.

 

This announcement and the information contained herein do not contain or constitute an offer for sale or the solicitation of an offer to purchase securities in Canada, the People’s Republic of China, Hong Kong SAR, Japan, Papua New Guinea, Singapore, the Republic of South Africa or Switzerland or any other jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction, and no public offer of rights or shares will be made in such jurisdictions. The Rio Tinto plc Nil Paid Rights, Rio Tinto plc Fully Paid Rights, Rio Tinto Limited Rights, Rio Tinto plc Provisional Allotment Letter, Rio Tinto Limited Entitlement and Acceptance Forms or New Rio Tinto plc Shares or New Rio Tinto Limited Shares have not been and will not be registered under the securities laws of such jurisdictions and may not be offered, sold, taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, within such jurisdictions except pursuant to an exemption from and in compliance with any applicable securities laws.

 

The distribution of this announcement and/or the Prospectus and/or the Australian offer document and/or the Rio Tinto plc Provisional Allotment Letter and/or the transfer of the Rio Tinto plc Nil Paid Rights, Rio Tinto plc Fully Paid Rights, Rio Tinto Limited Rights, Rio Tinto plc Provisional Allotment Letter, Rio Tinto Limited Entitlement and Acceptance Forms or New Rio Tinto plc Shares or New Rio Tinto Limited Shares into jurisdictions other than the UK, Australia or New Zealand may be restricted by law. Persons into whose possession this announcement comes should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

 

The Joint Sponsors, the Underwriters and Macquarie Capital (Europe) Limited are acting exclusively for the issuer and no one else in connection with the Rights Issues and will not regard any other person (whether or not a recipient of this announcement) as their respective client in relation to the Rights Issues and will not be responsible to anyone other than the issuer for providing the protections afforded to their respective clients or for providing advice in relation to the Rights Issues or any matters referred to in this announcement.

 

This announcement has been issued by, and is the sole responsibility of, Rio Tinto plc and Rio Tinto Limited apart from the responsibilities and liabilities, if any, which may be imposed on the Joint Sponsors and the Underwriters by the FSMA, none of the Joint Sponsors or Underwriters accepts any responsibility whatsoever and makes no representation or warranty, express or implied, for or in respect of the contents of this announcement, including its accuracy, completeness or verification or regarding the legality of an investment in the Rio Tinto plc Nil Paid Rights, Rio Tinto plc Fully Paid Rights, Rio Tinto Limited Rights, Rio Tinto plc Provisional Allotment Letter, Rio Tinto Limited Entitlement and Acceptance Forms or New Rio Tinto plc Shares or New Rio Tinto Limited Shares by an offeree or purchaser thereof under the laws applicable to such offeree or purchaser or for any other statement made or purported to be made by them, or on their behalf, in connection with the issuer, the Rio Tinto plc Nil Paid Rights, Rio Tinto plc Fully Paid Rights, Rio Tinto Limited Rights, Rio Tinto plc Provisional Allotment Letter, Rio Tinto Limited Entitlement and Acceptance Forms or New Rio Tinto plc Shares or New Rio Tinto Limited Shares, and nothing in this announcement is, or shall be relied upon as, a promise or representation in this respect, whether as to the past or future. The Joint Sponsors and the Underwriters accordingly disclaim any responsibility and liability whether arising in tort, contract or otherwise which they might otherwise be found to have in respect of this announcement or any such statement.

 

Neither the content of the issuer’s website nor any website accessible by hyperlinks on the Issuer’s website is incorporated in, or forms part of, this announcement.

 

Certain statements made in this announcement constitute forward-looking statements within the meaning of the US Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the use of words such as “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “plan”, “seek”, “continue”, “forecast” or similar expressions. All statements other than statements of historical facts included in this announcement, including, without limitation, those regarding the Group’s financial position including forecast or estimated profits, business strategy, plans and objectives of management for future operations (including development plans and objectives relating to the Group’s products, production forecasts and reserve and resource positions), are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, many of which are outside the control of the Group and its Directors, which may cause the actual results, performance, achievements, cash flows, dividends of the Group, the ability of the Group to satisfy its debt repayment obligations or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

 

Such forward-looking statements are based on numerous assumptions regarding the Group’s present and future business strategies and the environment in which the Group will operate in the future. Among the important factors that could cause the Group’s actual results, performance or achievements to differ materially from those in the forward-looking statements include, among others, economic conditions in relevant areas of the world, levels of actual production during any period, levels of demand, market prices and inflation, the ability to produce and transport products profitably, the impact of foreign currency exchange rates on market prices and operating costs, operational problems, political uncertainty, the actions of competitors, activities by governmental authorities such as changes in taxation or regulation and such other risk factors. Forward-looking statements should, therefore, be construed in light of such risk factors and undue reliance should not be placed on forward-looking statements. These forward-looking statements speak only as of the date of this announcement. The Group expressly disclaims any obligation or undertaking (except as required by applicable law, including the UK Listing Rules, Prospectus Rules, the Disclosure and Transparency Rules of the Financial Services Authority and the ASX Listing Rules) to release publicly any updates or revisions to any statement (including any forward-looking statement) contained herein to reflect any change in the Group’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

 

The Underwriters or the Joint Sponsors or any affiliate thereof acting as an investor for its or their own account(s) may subscribe for, retain, purchase or sell Rio Tinto plc Nil Paid Rights, Rio Tinto plc Fully Paid Rights, Rio Tinto plc Provisional Allotment Letter, Rio Tinto Limited Rights and/or New Rio Tinto plc Shares or New Rio Tinto Limited Shares for its or their own account(s) and may offer or sell such securities otherwise than in connection with the Rights Issues. The aforementioned entities do not intend to disclose the extent of any such investments or transactions otherwise than in accordance with any applicable legal or regulatory requirements.

 

The Underwriters or the Joint Sponsors may engage in trading activity other than, to the extent prohibited under applicable law and regulation, short selling to hedge commitments under the Underwriting Agreement or otherwise. Such activity may include purchases and sales of securities of Rio Tinto and related and other securities and instruments (including Rio Tinto plc Nil Paid Rights, Rio Tinto plc Fully Paid Rights, Rio Tinto plc Provisional Allotment Letter, Rio Tinto Limited Rights and/or New Rio Tinto plc Shares or New Rio Tinto Limited Shares).

 

Credit Suisse Securities (Europe) Limited, J.P. Morgan Cazenove Limited, Macquarie Capital (Europe) Limited (which are authorised and regulated in the United Kingdom by the FSA) are acting exclusively for Rio Tinto and no one else in connection with the Rights Issues and will not regard any other person (whether or not a recipient of this document) as a client in relation to the Rights Issues and will not be responsible to anyone other than Rio Tinto for providing the protections afforded to their respective clients nor for giving advice in relation to the Rights Issues or any transaction or arrangement referred to in this document.

 

 

END

 

 

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