Let Rio deal be a lesson in M&A strategy

The scrapping of a deal by Rio Tinto with Chinalco is a poignant reminder that China's long march for overseas acquisitions will be slow and tortuous.

Four years have passed since China National Offshore Oil Co (CNOOC) hit a political brick wall in its bid to buy California-based oil company Unocal. The US Congress opposed the deal, nervous over the extent of China's geopolitical influence on its own doorstep.

There is a key difference between the Unocal and Rio Tinto cases. Whereas the rejection of CNOOC's advances in 2005 was overtly political, the rupture of the Chinalco-Rio Tinto deal was attributed to commercial factors. When Rio Tinto decided on a rights issue and a joint venture with BHP Billiton, the commercial advantages to non-Chinese shareholders were obvious.