Rio Tinto wins fight against Ivanhoe poison pill

Tue Dec 13, 2011 3:38pm EST
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By Sonali Paul

MELBOURNE (Reuters) - An independent arbitrator cleared the way on Tuesday for mining group Rio Tinto Plc (RIO.L: Quote)(RIO.AX: Quote) to take over Ivanhoe Mines Ltd (IVN.TO: Quote), saying the $16 billion Canadian company's "poison pill" defense was not valid.

Anglo-Australian miner Rio Tinto, which owns 49 percent of Ivanhoe, has long been expected to bid for the company, coveting its majority stake in the massive Oyu Tolgoi copper and gold project in Mongolia.

The arbitrator ruled a poison pill takeover defense put in place by Ivanhoe does not apply to Rio Tinto, leaving the Vancouver-based firm vulnerable to Rio's advances and pushing its shares down roughly 20 percent in both Toronto and New York on Tuesday afternoon.

Ivanhoe shares fell C$4.20 to C$17.08 on the Toronto Stock Exchange, while its New York-listed shares fell $4.15 to $16.55, as analysts weighed in that the ruling gives Rio the ability to execute a creeping takeover of Ivanhoe.

The ruling prompted TD Securities to slash its price target on Ivanhoe shares to C$18.50 from C$31, as it factored out the takeover premium previously built into its calculation.

"With this arbitration (ruling), the poison pill cannot be used against Rio Tinto," said Scotia Capital analyst Tom Meyer in a note to clients. "Hence, we see the 'takeover premium' eroding from Ivanhoe Mines' share price over the coming trading sessions."

In a statement on Tuesday, Ivanhoe said it is continuing to evaluate the implications of the arbitrator's decision.

Rio said it reserved the right to increase its holding to a majority position from January 19, when an agreement limiting its stake expires, but added it currently had no intention of making a full takeover bid for Ivanhoe's shares.   Continued...