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Chinalco’s chief defends Rio bid: June 11 2009 18:35. The chairman of Chinalco, China’s state aluminium producer, defended his company’s bid to double its stake in Rio Tinto, saying the collapse of the deal last week was “totally out of our control”. Xiong Weiping told reporters that Chinalco had already agreed to significant amendments to the terms of the original $19.5bn deal, which was signed in February, and that he was confident the company would have been able to satisfy the concerns of shareholders and federal regulators in Australia. “I won’t comment on their performance during negotiations, but we are very disappointed with the decision of the Rio Tinto board to withdraw their recommendation for this transaction,” Mr Xiong said. The main obstacle had been the extent to which Chinalco would be represented on Rio’s board of directors, he explained. Chinalco is already the single largest shareholder in Rio Tinto Group, with 9.25 per cent, but has no board representation. Under the terms of the deal, it would also have become the largest investor in the group at the asset level and would have been entitled to nominate two non-executive directors on a 15-person board. The Australian government and Rio management sought assurances that Chinalco would nominate an Australian citizen to one of those positions, but it was unwilling to agree to that, according to someone familiar with the deal. Mr Xiong said Chinalco had agreed to reduce its proposed 18 per cent equity stake in Rio, address the concerns of UK shareholders over pre-emption rights for the convertible bond portion of the deal, and simplify the marketing and corporate governance structure relating to iron ore operations. It had also agreed to halve its holding in Rio’s Hammersley iron ore mine from 15 per cent to 7.5 per cent. “We felt we needed to have board representation commensurate with our position in order to protect our strategic and commercial interests and that this was a basic fundamental for a long-term strategic partnership,” Mr Xiong said. Chinalco had received “advice in principle” from the Australian government’s Federal Investment Review Board on how the transaction should be modified and had followed most of those recommendations. It confirmed on Wednesday that Rio Tinto would pay it a $195m break fee for withdrawing from the deal. When Jan du Plessis took over as Rio chairman in April, the company began negotiating with BHP Billiton on the $15.2bn rights issue and joint venturethat it chose last week instead of Chinalco’s offer. Under the terms of their agreement, Rio was required to inform Chinalco that it was discussing an alternative deal. Mr Xiong said Chinalco had not yet decided whether to participate in Rio’s planned rights issue.