Note 41 - Purchases and sales of subsidiaries, joint ventures, associates and other interests in businesses

2007 Financial statements

Note 41 - Purchases and sales of subsidiaries, joint ventures, associates and other interests in businesses

2007 Acquisitions

Alcan acquisition

On 23 October 2007, the Rio Tinto Group acquired a controlling 79.42 per cent interest in the issued share capital of Alcan Inc. The remaining 20.58 per cent was acquired by 14 November 2007. The total purchase price to acquire Alcan Inc amounted to US$38.7 billion.

Alcan Inc. is the parent company of an international group of companies involved in bauxite mining, alumina refining, aluminium smelting, engineered products, flexible and specialty packaging, as well as related research and development.

The Group has decided to dispose of Alcan Packaging, which is presented in the balance sheet in the lines: 'Assets held for sale' and 'Liabilities of disposal groups held for sale'. Therefore, the income and cash flow statements for the year exclude amounts relating to Alcan Packaging.

The fair values of the identifiable assets and liabilities of Alcan Inc. as at the date of acquisition were provisionally estimated as follows:

	IFRS carrying values in US$m	Fair value adjustments US$m	Provisional fair value to Group US$m
Intangible assets	804	6,663	7,467
Property, plant & equipment	11,579	6,703	18,282
Equity method investments	1,415	2,770	4,185
Inventories	2,643	213	2,856
Assets held for sale	6,984	-	6,984
Cash	991	-	991
Deferred tax assets	223	5	228
Other assets	4,353	231	4,584
Loans and borrowings	(5,580)	115	(5,465)
Liabilities of disposal groups held for sale	(2,642)	-	(2,642)
Deferred tax liabilities	(461)	(3,721)	(4,182)
Provisions for liabilities and charges	(4,581)	(57)	(4,638)
Other liabilities	(4,265)	(211)	(4,476)
Minority interest	(55)	-	(55)
Goodwill	2,055	12,478	14,533
Net attributable assets including goodwill	13,463	25,189	38,652
Total consideration:
Cost of shares			37,996
Acquisition costs			74
Liabilities assumed			132
Loans to acquired subsidiary			450
Total consideration - Alcan			38,652
Other subsidiaries and equity accounted units acquired			54
Total consideration			38,706

Cash outflow on acquisitions:
Total consideration			38,706
Net cash of acquired companies			(991)
Liabilities assumed			(132)
Other (including disposal proceeds of US$13 million)			(57)
Net acquisitions per cash flow statement			37,526

The future economic benefits represented by the goodwill include those associated with synergies, future development and expansion projects and the assembled workforce. As a result of the size of the acquisition and complexity of the valuation process, the above fair values are provisional. These will be subject to further review during the 12 months from the acquisition date.

For the period since acquisition, sales revenue of US$3,544 million (excluding equity accounted units) and profit after tax of US$293 million attributable to continuing operations are included in the consolidated income statement.

The following pro forma summary presents the Group as if Alcan Inc. had been acquired on 1 January 2007. The pro forma amounts include the results of the acquired group, recognising the amortisation of the fair values attributed to the assets acquired and the interest expense on debt incurred as a result of the acquisition. The proforma interest charge for the whole of 2007 on the acquisition debt has been based on the one month LIBOR rate as at 31 December 2007, of 4.6 per cent. The pro forma amounts do not take account of synergies anticipated as a result of the acquisition; but include non recurring costs borne by Alcan Inc. relating to the acquisition and suffer the costs of financing assets held for sale. The pro forma information does not necessarily reflect the actual results that would have occurred, nor is it necessarily indicative of future results of operations of the combined companies.

	2007 US$m
Consolidated sales revenue	45,590
Profit for the year (including amounts attributable to outside equity shareholders)	7,727

2006 Acquisitions

Name of operation	Location	Principal activities	Ownership acquired %	Date of acquisition
Associates
Ivanhoe Mines	Canada	Copper and gold mining	9.95	18 October 2006
Proportionally consolidated units
Hope Downs Joint Venture	Australia	Iron ore mining	50	16 March 2006

2006 Disposals

Name of operation	Location	Principal activities	Ownership disposed %	Date of disposal
Jointly controlled entities
Eurallumina SpA	Italy	Alumina production	56.16	2 November 2006


Notes	Expand
The aggregate profit on disposal of interests in businesses in 2006 was US$5 million (US$3 million net of tax). These gains have been excluded from Underlying earnings, as shown in note 2. The Cash flow statement includes the following relating to acquisitions and disposals of interests in businesses: US$279 million in '(Acquisitions)/disposals of subsidiaries, joint ventures and associates', comprising US$303 million paid for acquisitions, net of US$24 million of disposal proceeds. In accordance with IAS 7, these proceeds were stated net of US$17 million of cash and cash equivalents transferred on sale of subsidiaries. US$167 million included in 'Purchase of financial assets'. Non cash disposal proceeds of US$23 million were received during the year.