Rio Tinto plans $2.2 bn gems unit IPO

Sale may help stimulate IPO market as global offerings slow in second quarter

Rio Tinto, the world’s second-largest mining company, plans to sell its gem-mining operations in an initial public offering that could be worth as much as $2.2 bn this year, adding to a growing number of IPOs planned worldwide.

Rio Tinto has hired Morgan Stanley to manage an IPO in London of its gems unit, the world’s third-biggest miner of rough diamonds, Bloomberg reports, citing an unidentified person close to the matter. Rio Tinto is also seeking to sell its Canadian iron ore operations and its Pacific Aluminum business, although it’s not clear whether it also plans IPOs for those.

Plans to launch the IPO for the gems unit likely signal that Rio Tinto failed to find a private buyer for the business, as the company has been seeking to sell it since March 2012, the news agency states. The planned sales are part of a wave of unit sell-offs by global miners that could amount to $35 bn this year, according to a Deutsche Bank analysis in March.

Global proceeds from IPOs surged by almost half in the first quarter of this year compared with the same period last year as investor confidence increased amid a more optimistic outlook for US economic recovery and the gradual fading of concerns about the sovereign debt crisis in Europe. Proceeds totaled $18.4 bn in the first quarter of 2013 from $12.4 bn in the same period in 2012, according to data from Renaissance Capital.

But global IPO proceeds have fallen sharply so far in the second quarter and, for the year to date, have dropped 0.3 percent from the same period last year, according to a running daily tally carried out by Renaissance. The number of IPOs priced in the year to date has decreased 9.3 percent from a year ago to 88, Renaissance adds.

High-profile IPOs so far this year include Zoetis, Pfizer’s animal health business, which raised $2.2 bn in January, making it the largest IPO in the US since Facebook’s IPO in May 2012, and ING US, which raised $1.27 bn last month.

Japanese railway and property firm Seibu Holdings, valued at as much as $12.4 bn, is also planning an IPO this year, along with mobile telecommunications company Everything Everywhere, which may raise as much as $15 bn in an IPO.

Amid speculation of a revival in IPOs from Asia, at least four Chinese companies are also planning to launch IPOs this year through US markets, according to the Wall Street Journal. The newspaper, citing unidentified sources, says Chinese online commerce giant Alibaba is considering an IPO worth tens of billions of dollars through either Hong Kong or New York.

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