Rio Tinto Group (RIO) Chief Executive Officer Tom Albanese has been removed from the company after disastrous deals led to a write down of approximately $14 billion. The two major deals that led to his departure were the $38 billion acquisition of Alcan Inc. and the $4.1 billion purchase of coal producer Riversdale Mining Ltd. of Mozambique.
Since 2009, Rio has had to write down its aluminum division by over $29 billion, and over the last couple of years wrote down the Riversdale acquisition by 70 percent.
At particular fault was the failure of analysis when deciding to buy the companies, as well as the lack of discipline in using capital. After the Alcan acquisition the debt of the company soared to as high as 19 times what it had been.
Replacing Albanese will be the head of Rio's iron ore unit - Sam Walsh. The decision to choose the 63-year-old Walsh suggests the company is grooming a replacement while he attempts to right the ship in order to have it relatively healthy for an incoming CEO.
Chairman Jan du Plessis said this, “The Rio Tinto board fully acknowledges that a writedown of this scale in relation to the relatively recent Mozambique acquisition is unacceptable. We are also deeply disappointed to have to take a further substantial writedown in our aluminum businesses, albeit in an industry that continues to experience significant adverse changes globally.”
RIO was trading at $54.51, down $0.52, or 0.94%, as of 1:24 PM EST.