Post by Catdaddy on Nov 8, 2007 11:52:50 GMT -5
BHP tilts at Rio, proposing merger of giants
www.theage.com.au/news/business/bhp-tilts-at-rio-proposing-merger-of-giants/2007/11/09/1194329423668.html
Tan Hwee Ann and Dale Crofts
November 9, 2007
BHP Billiton confirmed last night it had proposed the world's biggest mining merger with rival Rio Tinto Group, a proposal that Rio rejected.
Rio said in a separate statement that BHP's offer "significantly undervalues" it.
BHP, however, indicated it was not taking no for an answer, saying it was trying to arrange a meeting with Rio.
Rumours of a possible merger between the two mining giants had pushed Rio shares $1.18 higher to $113.40 in Australian trading in a falling market. In London last night news of BHP's proposal sent Rio shares up 28 per cent while BHP Billiton shares fell by 2 per cent.
A merger of BHP and Rio would create a mining giant worth about $406 billion, based on their market values before last night's developments.
Melbourne-based BHP said in a statement to the Regulatory News Service it had "recently" written to the Rio board with an outline plan for a merger. Rio said in its statement: "The boards of Rio Tinto have given the proposal careful consideration and concluded that it significantly undervalues Rio Tinto and its prospects. The boards have unanimously rejected the proposal as not being in the best interests of shareholders."
A combined company would challenge Brazil's CVRD as the world's largest supplier of iron ore as rising demand in China pushes prices of the raw material used in steel making to a record. BHP would also gain access to more than 15 million tonnes of copper and 4.3 million tonnes of aluminium. Rio Tinto's annual profit rose 43 per cent to $US7.44 billion in 2006.
"Rio is a massive cash generator," Joe Youssef, a senior adviser at Macquarie Equities in Sydney, said before the statements. "You can see why it's an attractive proposition based on its cash flows."
The combined company would control 36 per cent of the iron-ore market. It also would be the biggest supplier of energy coal and copper, accounting for 14 per cent and 13 per cent of market share globally, Citigroup said.
Demand for iron ore is gaining as China imports more of the raw material to bolster its steel making capacity. The country may produce as many as 484 million tonnes of steel this year, a doubling in the past four years, according to World Steel Dynamics, a research firm in Englewood Cliffs, New Jersey.
The benchmark price of iron ore may rise next year because of surging demand in China, making it the sixth straight annual increase, according to NMDC, India's biggest miner of the ore. At present, BHP, Rio and Vale control about 80 per cent of the seaborne trade in the ore.
The combined company would have mines and oilfields in six continents, including a stake in Chile's Escondida, the world's largest copper mine, and the world's second-biggest uranium producer in Australia. The company also would have assets in diamonds, silver, lead and nickel.
Rio Tinto will become the world's largest aluminium producer this year after agreeing to buy Montreal-based Alcan for $US38.1 billion. The deal is quadrupling Rio's output of the light metal used in planes and car parts, allowing it to surpass Russia's United Co Rusal as the world's largest producer.
Rio Tinto is the third-largest mining company by sales behind BHP and Anglo-American. BHP already is the world's largest coking coal producer.
Prices of iron ore, thermal coal and nickel have soared to records this year due to rising Chinese demand.
BLOOMBERG
www.theage.com.au/news/business/bhp-tilts-at-rio-proposing-merger-of-giants/2007/11/09/1194329423668.html
Tan Hwee Ann and Dale Crofts
November 9, 2007
BHP Billiton confirmed last night it had proposed the world's biggest mining merger with rival Rio Tinto Group, a proposal that Rio rejected.
Rio said in a separate statement that BHP's offer "significantly undervalues" it.
BHP, however, indicated it was not taking no for an answer, saying it was trying to arrange a meeting with Rio.
Rumours of a possible merger between the two mining giants had pushed Rio shares $1.18 higher to $113.40 in Australian trading in a falling market. In London last night news of BHP's proposal sent Rio shares up 28 per cent while BHP Billiton shares fell by 2 per cent.
A merger of BHP and Rio would create a mining giant worth about $406 billion, based on their market values before last night's developments.
Melbourne-based BHP said in a statement to the Regulatory News Service it had "recently" written to the Rio board with an outline plan for a merger. Rio said in its statement: "The boards of Rio Tinto have given the proposal careful consideration and concluded that it significantly undervalues Rio Tinto and its prospects. The boards have unanimously rejected the proposal as not being in the best interests of shareholders."
A combined company would challenge Brazil's CVRD as the world's largest supplier of iron ore as rising demand in China pushes prices of the raw material used in steel making to a record. BHP would also gain access to more than 15 million tonnes of copper and 4.3 million tonnes of aluminium. Rio Tinto's annual profit rose 43 per cent to $US7.44 billion in 2006.
"Rio is a massive cash generator," Joe Youssef, a senior adviser at Macquarie Equities in Sydney, said before the statements. "You can see why it's an attractive proposition based on its cash flows."
The combined company would control 36 per cent of the iron-ore market. It also would be the biggest supplier of energy coal and copper, accounting for 14 per cent and 13 per cent of market share globally, Citigroup said.
Demand for iron ore is gaining as China imports more of the raw material to bolster its steel making capacity. The country may produce as many as 484 million tonnes of steel this year, a doubling in the past four years, according to World Steel Dynamics, a research firm in Englewood Cliffs, New Jersey.
The benchmark price of iron ore may rise next year because of surging demand in China, making it the sixth straight annual increase, according to NMDC, India's biggest miner of the ore. At present, BHP, Rio and Vale control about 80 per cent of the seaborne trade in the ore.
The combined company would have mines and oilfields in six continents, including a stake in Chile's Escondida, the world's largest copper mine, and the world's second-biggest uranium producer in Australia. The company also would have assets in diamonds, silver, lead and nickel.
Rio Tinto will become the world's largest aluminium producer this year after agreeing to buy Montreal-based Alcan for $US38.1 billion. The deal is quadrupling Rio's output of the light metal used in planes and car parts, allowing it to surpass Russia's United Co Rusal as the world's largest producer.
Rio Tinto is the third-largest mining company by sales behind BHP and Anglo-American. BHP already is the world's largest coking coal producer.
Prices of iron ore, thermal coal and nickel have soared to records this year due to rising Chinese demand.
BLOOMBERG
