London, England — 03 June 2013 – The Rio Tinto Group is pursuing an initial public offering of its gem unit “’ the world’s largest supplier of natural coloured diamonds “’ after failing in its efforts to find a buyer.
Quoting a person familiar with the matter but asking not to be identified because the process is private, Bloomberg News reports that Rio has hired Morgan Stanley to oversee an IPO here. The company is still open to offers for the operations, the person said. Rio has been considering divesting the assets since March last year, saying they no longer fitted with its strategy.
The unit, the world’s third-biggest producer of rough diamonds with mines in Canada, Australia and Zimbabwe, may be worth about US$2.2 billion, Deutsche Bank AG said in a March 11 report. Rio Tinto has also announced the potential sale of its Pacific aluminium unit, and is seeking to sell its Canadian iron ore operations, a person close to the matter said in March.
“Rio has been trying to get out of diamonds for a very long time,” Evan Lucas, a markets strategist at IG Limited in Melbourne, said by phone. “Looking to do an IPO suggests that they haven’t been able to find a private buyer.”
Rio declined 2.5% to A$53.80 at the close in Sydney.
David Luff, a Melbourne-based spokesman for Rio, didn’t immediately return a phone message seeking comment on the potential share sale.
The decision on a whole or partial sale of the diamond operations or a separate listing would depend on which offers the most value to its shareholders, Alan Davies, CEO of diamonds and minerals, said in April.
“It’s a good business in itself,” said IG’s Lucas. “It’s probably too small to be a real player within their portfolio makeup. It’s a very specific niche market.”
Rio, the world’s second-largest mining company, is working on asset sales as well as cutting staff as waning global demand for commodities is crimping revenue across the sector.
BHP Billiton and Rio Tinto are leading global asset sales by mining companies and may sell businesses or stakes in mines for as much as US$35 billion, according to a March report by Deutsche Bank AG.
Glencore Xstrata plc and private-equity firm Blackstone Group LP are considering bids for Rio’s 59% in Canada’s Iron Ore Company, the Wall Street Journal reported, citing unidentified people familiar with the matter. The stake may be worth about US$4 billion, according to the paper.
Source: Bloomberg News. For more information, click here.