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Battle for Rio Tinto heats up

February 06, 2008

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Hong Kong—Mining company BHP Billiton upped the stakes on Wednesday in its bid to buy Australian mining company Rio Tinto, various news services reported.

According to both Forbes.com and The Wall Street Journal, BHP Billiton put out a bid worth about $147 billion. BHP Billiton proposes to buy Rio Tinto at an exchange ratio of 3.4 of its shares for every Rio Tinto share.

If the deal goes through, it would create a mining giant that would be the world's third-largest corporation by market capitalization, after Exxon Mobil and General Electric, according to Forbes.com.

"This [offer] is very aggressive," Tim Gerrard, a mining analyst at Austock Limited, told Forbes.com. "What BHP is saying is, we are very serious; we would launch a hostile takeover if necessary."

A hostile takeover scenario would ensue if 50 percent of Rio Tinto shareholders endorse the bid.

BHP Billiton, however, hopes that its high bid will convince Rio Tinto management, including CEO Tom Albanese, to engage in talks on the deal.

Rio Tinto remained seemingly ambivalent.

In a statement released on Wednesday, Rio Tinto Chairman Paul Skinner said, "The boards of Rio Tinto will consider the terms of the proposal carefully in the light of all circumstances and will make a further statement once they have completed this assessment. In the meantime, the boards encourage shareholders not to take any action."

The proposed BHP Billiton purchase of Rio Tinto has struck fear in developing countries such as China, where companies worry that such a deal would drive up prices for raw materials needed to sustain strong economic growth.

The New York Times reported on Friday that the state-owned Aluminum Corporation of China joined Alcoa in taking a 12 percent stake in Rio Tinto, an attempt to derail the BHP Billiton takeover.

Skinner called China's move an "unsolicited development" that "reinforces our view of the long-term value of Rio Tinto."

"In line with our long-standing strategy, we shall continue to focus on operating our many world-class assets to maximize value and prospects for shareholders," he said.
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TOPICS
Business | Company Activities and Information | Mergers and Acquisitions | Takeovers

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