Rio Tinto these days is throwing off cash at the rate of $1bn a month, or about £17m a day. There's only so long that a management team in this happy position can endure the tedious routine of returning the spoils to shareholders in the form of share buy-backs. At some point, the temptation to splurge becomes overwhelming, and yesterday Rio succumbed.
The bid for Alcan, worth $38bn, equates to one-third of Rio's market value. Even by the gung-ho standards of the global mining industry, that's a huge ratio to pay out in cash. S&P, the rating agency, drily called it "a material departure" from Rio's "historically prudent financial policy".
Indeed so. Rio's last significant deal came seven years ago and that was worth $2bn, big at the time but barely noticeable on modern mining radars. In the Alcan deal, it is paying $101 apiece for shares that were trading at $61 before Alcoa made its hostile offer. Rio has also, it is clear, had to fight extremely hard in a behind-the-scenes auction to defeat Brazilian group CVRD.
So what's going on? Has Rio been suckered into the mining industry's grand game of consolidation right at the top of the commodities market?
Almost by definition, that worry can't be banished for a few years yet. The case for the defence is that mining sceptics have been declaring prices to be mad for two full years, but the pace of Chinese industrialisation, which is the big driver of demand, simply hasn't slowed.
Deals that looked toppy at the time - such as BHP Billiton's $8.6bn purchase of WMC in 2005 ...#8209; now look like bargains. The same is true at Xstrata, a company built by acquisitions; it has rewarded its shareholders handsomely.
Yet the whiff of danger seems more real with Alcan, even if it is clearly a quality, low-cost producer. The takeover savings, at $600m, are reasonable, but Rio is having to bend over backwards to satisfy political and environmental sensitivities in Alcan's home patch of Quebec. And the deal comes at a moment when the avaricious investment bankers were starting to wonder whether Rio itself could be prey rather than predator.
We shall have to see. China, if its growth continues unabated, could make the worries about price completely redundant. For now, investors seem happy to whistle the industry's tune that metals prices will be "longer for stronger".
That being so, the takeover of Alcan will inevitably prompt a fresh outbreak of deal fever. The mining industry virtually invented mergers and acquisitions - they're so much easier, and more fun, than exploration. But when conservative types like Rio splash onto the middle of the dance floor, you have to wonder whether the party is growing old
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