Blackstone planning Rio break-up

US private equity giant Blackstone is planning an audacious break-up bid for the world’s third largest miner Rio Tinto.

Blackstone is reportedly in the middle of putting together a consortium – believed to include a Chinese sovereign wealth fund – to mount the bid for Rio Tinto, which is currently the target of an unwelcome approach by rival mining giant BHP Billiton.

Blackstone believes Rio Tinto’s key iron ore operations in Western Australia are worth at least US$110bn.

BHP has proposed a 3-for-1 share swap deal valuing Rio Tinto at around US$130bn.

Blackstone is already believed to have appointed lawyers for the approach and is in talks with bankers and public relations companies, The Daily Telegraph reported without disclosing sources.

As part of its defence against BHP’s offer, Rio Tinto has identified up to US$30bn of disposals it believes will drive shareholder value. These include its talc business, two uranium projects in Australia and the US, the Northparkes copper and gold mine in Australia and the US Greens Creek zinc, lead and silver mine.

But Blackstone is ready to go further and break the business up completely, the report said. This would mean undoing this year’s merger with aluminium producer Alcan Inc, as well as selling off the company’s main asset – its iron ore business.