Riversdale's share price yesterday crept beyond Rio's $16 offer price, opening up 4c this morning to $16.61, as analysts question whether the offer price reflects the strategic value of establishing a foothold in the new coking coal province of Mozambique in southeast Africa.
Rio said the deal was part of its strategy of developing world-class, long-life, low-cost assets and some analysts believe that Riversdale could eventually supply up to 10% of the global market for coking coal.
"I think there is a strong potential (for rival bids)," Reuters quoted Paterson Securities analyst Andrew Harrington as saying.
"There are not that many big new coking coal assets out there and this one is very large and it's near to production."
The Sydney Morning Herald quoted Hartleys senior resources analyst Andrew Muir as saying that Rio's initial $16 offer was the "opening shot in a bidding war for the company to gain access to the world-class resources of its Mozambique projects".
He valued Riversdale at $18.80 a share and beyond $20 a share if key infrastructure issues with its Zambeze project were resolved.
Rio needs acceptances from 50% of Riversdale shareholders, which would require getting agreement from at least one of the three big shareholders that together own about half the company, according to Reuters data.
Before recommending Rio's offer, Riversdale is believed to have had discussions with other major resources companies, including Anglo American, ArcelorMittal and Xstrata.
After announcing on December 6 that it was in discussions with Rio, Riversdale secured Rio a pre-bid agreement, giving it a call option over 14.9% of the company, with Riversdale directors and institutional shareholders providing the backing.
Under the terms of the agreement, Riversdale cannot solicit competing proposals and Rio would receive a $37.8 million break fee if its offer was not accepted by Riversdale.
Riversdale shares have risen more than 130% in line with the surge in the price of coking coal beyond $US220 per tonne as demand picks up from Chinese and Indian steelmakers.