ACCC approves Rio, Chinalco deal

The Australian competition watchdog has given the green light for Chinese
state-owned Chinalco to take a strategic stake in Rio Tinto Ltd, saying the deal
will not influence iron ore prices.
The Australian Competition and Consumer Competition (ACCC) said on Wednesday it
would not oppose the $US19.5 billion ($A28.14 billion) transaction, which was
unlikely to result in a substantial lessening of competition.
The ACCC's decision clears the first regulatory hurdle for the transaction, which is
facing an in-depth examination from the Foreign Investment Review Board (FIRB).
"I didn't think it was going to bother the ACCC," Ord Minnett analyst Peter Arden
told AAP.
"I do think Rio Tinto might face a few challenges and notionally have some
conditions put on them, but I still think they'll get through. There is a long way
to go."
The transaction involves Chinalco acquiring stakes in a number Rio Tinto assets,
including iron ore mines and increase its interest in the dual-listed miner from
nine per cent to 18 per cent.
Chinalco's ownership by the Chinese government has raised concerns that the
transaction may provide the group with undue influence over the pricing of iron ore,
a major export commodity to China.
The ACCC said it examined whether Chinalco would have the ability to control or
influence Rio Tinto to decrease global iron ore prices below competitive levels to
the benefit of Chinese steel mills.
The competition watchdog concluded that Chinalco and Rio Tinto "would be unlikely to
have the ability to unilaterally decrease global iron ore prices below competitive
levels".
The ACCC also considered the likely effect of competition for the supply of bauxite,
copper and alumina, and determined that the transaction was unlikely to result in a
lessening of competition.
"Therefore, the ACCC concluded the proposed acquisition was unlikely to
substantially lessen competition under section 50 of the Trade Practices Act 1974,"
the competition watchdog said in a statement.
The ACCC's review of the transaction differs to the FIRB's review.
The FIRB, which last week extended its examination of the transaction by 90-days,
aims to determine whether the proposed deal would be contrary to Australia's
national interest.
Rio Tinto shareholders and some Australian politicians have expressed concerns about
Chinalco taking a significant stake in the global miner.
The transaction has also drawn the ire of some of Rio Tinto's UK investors, who
expressed disquiet over not being offered the chance to participate in a rights
issue.
Rio Tinto has been forced to seek a lifeline to help tackle the $US38 billion
($A54.84 billion) mountain of debt it incurred buying Canadian aluminium producer
Alcan Inc in 2007.
Shares in Rio Tinto added 56 cents, or 1.05 per cent to close at $53.93.