Shares digital

Over £1.2 million in share deals would seem to imply an extreme bout of confidence is sweeping management of global mining giant Rio Tinto (RIO), but things are not necessarily as they seem. Our table below shows chief executive Tom Albanese and finance director Guy Elliott ploughing £642,022 and £584,675 respectively into slugs of the group’s stock, a large financial commitment to say the least, yet this masks the reality somewhat, since both deals are merely the realisation of company and share price performance plans that form part of the duo’s hefty pay packets. Exactly how much the two directors were paid in 2007 is yet to be made public, but based on 2006 basic salary figures – $899,000 and $1.01 million respectively, or roughly £480,000 and £530,000 – it appears that neither has done quite as well as they might, since Rio Tinto operates a policy that allows directors to receive up to twice their annual salary in share awards.

Even so, these share awards remain generous, although shareholders are unlikely to quibble over the stock handouts given the way the company has carefully orchestrated the share’s price higher in the wake of takeover interest from rival BHP Billiton (BLT).

Since a bid was first mooted late last year Rio’s shares have jumped roughly a third higher yet even before that the stock had risen by over 50% in less than a year thanks to the strength of commodity prices.

BHP, frustrated by Albanese’s reluctance to rubber stamp a merger, took the unusual step of launching a hostile bid for the group earlier this month (6 February) worth roughly £75 billion (the biggest mining industry deal ever) on a 3.4 BHP shares for every Rio share basis. This was a clear attempt to bypass Rio’s management and appeal directly to its thousands of shareholders, but Albanese has stuck to his guns, knocking back the offer and warning shareholders against having their heads turned by a deal that undervalues the group’s potential.

Shares says: A takeover battle could last for months, if it happens at all, but in the meantime investors should sit tight and watch developments.