Posted on 27 Dec 2007
Rio hits back at BHP offer in chairman's letter
Rio Tinto Ltd/Plc on Thursday hit back at rival BHP Billiton's hostile approach, playing up its independent growth prospects amid renewed speculation of a Chinese-backed counter bid.
Beijing has sanctioned major state-owned corporates to look into three strategies for mounting counter-bids for Rio, including forming a domestic consortium; local players working in concert with foreign companies; or buying shares on the open market, according to a Dec. 24 report in the South China Morning Post.
Investment group Blackstone (BX.N: Quote, Profile, Research) this month refuted media reports it was planning a bid for Rio with a consortium believed to include China's $200 billion sovereign wealth fund.
Rio Chairman Paul Skinner reminded shareholders in an open letter of Rio's growth plans for iron ore and copper mining and for aluminium production.
"Together these are positioned to capture strong growth in demand in the developing economies, including China and India," Skinner said.
Rio already has promised to pay a 30 percent higher dividend this year and no less than 20 percent more in each of the following two years.
BHP Chief Executive Marius Kloppers is persistent in promoting what he calls "compelling synergies" in a tie up, underscored by the two companies neighbouring iron ore operations in Australia and partnership in the world's biggest copper mine.
Rio is the bigger of the two in iron ore mining, though BHP overall mines more copper.
BHP has said a marriage would generate $3.7 billion in synergy benefits after seven years, and has pledged to buy back $30 billion in shares if the deal goes through.
Rio, already the world's number two-ranked iron ore miner by volume behind Brazil's Vale (VALE5.SA: Quote, Profile, Research) and the top aluminium company, has been promoting its own growth prospects since BHP (BLT.L: Quote, Profile, Research) announced its three-for-one share offer proposal for Rio on Nov. 8. Rio immediately rebuffed the overture, which stops short of an outright offer to acquire Rio's shares. In the letter, Skinner said he was "pleased" with a requirement that BHP must now put a formal bid on the table by Feb. 6, 2008, or walk away for at least six months.
Britain's Takeover Panel has ordered BHP to decide by Feb. 6 whether to make a bid for Rio or walk away under a 'put up or shut up' clause. [ID:nL21473594]
A tie-up would assemble a massive controlling force across a range of industrial-use commodities beyond iron ore, such as copper, aluminium and coal -- raw materials driving growth in emerging nations such as China and India.
Rio was up 2 percent to A$135.21, while BHP was 1.5 percent up at A$41.13. ($1=A$1.15) (Reporting by James Regan; Editing by James Thornhill)
