Rinehart faces fight for $591 million takeover target

Private equity firm Resource Capital Fund, which owns 48 per cent of the stock, and Phil King’s Regal Funds Management, which owns 1 per cent, have both dug their heels in on the offer from Mrs Rinehart’s Hancock Corporation.

RFC said it would reject the two-tiered offer which starts at $2.20 a share and increases to $2.50 a share if Hancock builds its stake to more than 50 per cent, but left the door open to accepting a higher offer.

Regal said the Hancock offer vastly undervalued Riversdale.

Hancock’s offer for full ownership of Riversdale and its Grassy Mountain coal project in Alberta, Canada, is a big step up from the $1.70 a share it paid for 19.8 per cent stake in August and September last year.

Riversdale chairman Gary Lawler wrote to shareholders on Thursday warning them that in light of the RFC and Regal stand they should consider the Hancock offer as $2.20 a share and not take any action.

Mr Lawler foreshadowed a bidding war for Riversdale and said the board was aware existing investors, aside from Hancock, wanted to buy more shares.

“We are continuing to engage with strategic parties that have shown interest in Riversdale and the Grassy Mountain Project,” he said.

"A number of interested parties have signed confidentially agreements and are undertaking due diligence."

Mr Lawler said the Riversdale board, excluding Tad Watroba who is also a Hancock director and has declared a conflict of interest, was working to procure a higher offer but there was no certainty it would eventuate.

The board has hired Macquarie Capital and Ashurst as advisers and engaged Grant Thornton to prepare an independent expert’s report that will included a valuation on Riversdale.

The latest twist in the battle over Riversdale comes after founders Michael O'Keefe, Steve Malyon and Anthony Martin agreed to accept the Hancock offer.

Regal recently increased its stake in Atrum Coal, which has a flagship project next door to Glassy Mountain, to 10 per cent.