Replies to post #267 on The Rising Influence of Rising Affluence

[DewDiligence]

RTP Spins Off 52% of US Coal Company

[The Cloud Peak (CLD) IPO price of $15/sh is below the anticipated range. The parent company, RTP, is one of the world’s three largest mining companies (along with BHP/BBL and VALE) and has by far the worst balance sheet of the three. Hence, RTP needed this IPO as a way to raise badly needed cash for the parent company. The question is: What’s in it for the buyers of the IPO?]

http://www.reuters.com/article/marketsNews/idAFN1919270220091120

›Thu Nov 19, 2009 7:50pm EST
By Clare Baldwin and Phil Wahba

NEW YORK, Nov 19 (Reuters) - U.S. coal miner Cloud Peak Energy Inc (CLD), a unit of Rio Tinto Plc, priced shares in its initial public offering below expectations on concerns the flotation was designed to help its parent's balance sheet rather than fund its own growth.

Gillette, Wyoming-based Cloud Peak sold 30.6 million shares at $15 each, raising about $459 million. But Cloud Peak had expected to price them between $16 and $18, according to a regulatory filing.

Almost all of the proceeds will go to Rio Tinto Plc (RTP) (RIO.L) (RIO.AX) and the Anglo-Australian miner will retain a 48.3 percent stake in Cloud Peak.

Rio Tinto is saddled with debt stemming from its 2007 acquisition of Canadian aluminum maker Alcan and attempted to take Cloud Peak public last year, but postponed the IPO, citing difficult market conditions at the time.

"There's investor push-back because it's (money) not going back to the company and it's not for growth. It's just a Rio Tinto bailout," said IPOdesktop.com president Francis Gaskins.

Analysts expressed concerns last week that the IPO was overpriced relative to Cloud Peak's peers and because of uncertainty in the coal markets.

Cloud Peak is the third largest U.S. producer of coal and owns surface mines in Wyoming and Montana. In 2008, coal from its mines generated about 4.4 percent of the electricity produced in the United States, according to a prospectus.

Of the 46 U.S.-listed IPOs so far this year, 7 have been spin-offs.

Cloud Peak reported sales of $1.06 billion for the nine months ended Sept. 30, up 17.4 percent over the year earlier results, with a profit of $190.1 million.

Cloud Peak shares are set to begin trading on Friday on the New York Stock Exchange under the symbol "CLD."

The IPOs underwriters, led by Credit Suisse, Morgan Stanley, and RBC Capital Markets, have the option to buy another 4.59 million shares.‹