Looks like BHP has dropped the Rio bid
https://www.bloomberg.com/apps/news?pid=20601087&sid=a7OHLzv30egU&refer=home
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Nov. 25 (Bloomberg) -- BHP Billiton Ltd., the world’slargest mining company, scrapped its $66 billion offer for RioTinto Group, citing the turmoil in global markets.
BHP Chief Executive Officer Marius Kloppers said buying Riowould have increased his company’s debt and it would have beendifficult to sell assets. The worst financial crisis since theGreat Depression has stalled credit markets and cut demand forraw materials, slashing prices. The European Commission hadexpressed concern that a combination of the companies might havelimited competition in the iron ore market.
“We have concerns about the continued deterioration of thenear term global economic conditions, the lack of any certaintyas to the time it will take for conditions to improve and therisks that these issues imply for shareholder value,” DonArgus, chairman of Melbourne-based BHP, said today in astatement to the Australian stock exchange.
BHP rose 106 pence, or 11 percent, to 1,086 pence as of8:23 a.m. in London trading. Rio fell 36 percent to 1,577 pence,valuing the company at 28.4 billion pounds ($43.1 billion).
“BHP needs to focus on existing operations and I thinkgoing into an economic downturn they need to batten down thehatches and generate as much cash flow as they can,” said JasonTeh, who helps manage the equivalent of $5.7 billion atInvestors Mutual Ltd. in Sydney. He holds BHP and Rio shares.
‘Best Interests’
“We note their comments,” Nick Cobban, a spokesman forRio in London, said by phone. Rio, the world’s second-largestiron ore producer, rejected BHP’s sweetened, all-share offer onFeb. 6, saying it undervalued the company and its growthprospects. BHP had offered 3.4 shares for every Rio share held.
Rio’s spokeswoman Amanda Buckley wasn’t immediatelyavailable to comment when contacted at her Melbourne office.
“The BHP Billiton board today decided it no longerbelieves that completion of the offer for Rio Tinto would be inthe best interests of BHP Billiton shareholders,” Argus said.
The hostile bid had angered iron ore customers includingPosco, Korea’s biggest steelmaker, and JFE Steel Corp., rankedthird worldwide. The acquisition would have raised iron oreprices and should have been blocked by regulators, thesteelmakers said.
The value of BHP’s offer had slumped following the drop incommodity prices this year. It was worth $66 billion at theclose of trade in London yesterday compared with a peak of $194billion May 19.
Aluminum Corp. of China, the largest shareholder in Rio,said BHP Billiton Ltd.’s dropped takeover bid would benefitChinese steelmakers.
“This is definitely good news,” Lu Youqing, vice presidentof the Beijing-based company, said today by phone. “We respectBHP’s decision.”
Chinalco, as the company is known, bought a 9 percent stakein Rio with Alcoa Inc. in February.
To contact the reporter on this story:Rebecca Keenan in Melbourne atrkeenan5@bloomberg.net
Last Updated: November 25, 2008 03:25 EST