By Jason Simpkins
Associate Editor
After having its first takeover proposal rejected by Rio Tinto PLC (RTP), BHP Billiton Ltd. (BHP) appears poised take another shot at wooing its fellow mining giant.
Rio Chief Executive Officer Tom Albanese rejected BHP's initial $127 billion offer, saying it "significantly undervalued Rio Tinto and its prospects." Albanese also said the bid, which offered three shares of BHP for every one share of Rio, was not just out of the ballpark, but "several ballparks away" from being an accurate appraisal.
Afterwards, Rio approached the U.K. Takeover Panel and asked the regulatory agency to set a deadline for BHP to "put up or shut up." A deadline was set for Feb. 6. If BHP fails to make another offer by then, it must wait six months before it's eligible to make another.
However, early reports coming out of Australia indicate that BHP Billiton and its Chief Executive Officer Marius Kloppers have reloaded and are ready to take another shot at Rio, possibly by the end of this week - three weeks before the established deadline.
Australia's Herald Sun reported yesterday (Tuesday) on rumors that BHP was preparing to sweeten its proposed deal by upping its offer to $151 per share. The previous offer valued shares of Rio at $138 a piece, a 20% premium to their worth at the time.
The difference in the new offer, intended to win over Rio shareholders, would be an additional cash offer of $13 per share. BHP might also increase its stock offer from three BHP shares for every Rio share, to 3.6.
BHP is also playing up its oil interests, an area where Rio currently lacks involvement. BHP announced yesterday that its new Stybarrow oilfield off the west coast of Australia is operating to capacity.
Normally a large resource company like BHP would save those kinds of production details for its quarterly report. But the report for the December quarter isn't due out until next week. Regardless of its intent, the fact that BHP wanted to telegraph success in its oil operations seems slightly suspicious.
Last month the company suspended a $10 billion buyback plan. It's a common practice, as a precaution against insider trading, for companies to suspend share buybacks if there has been a development that might affect the value of their securities.
News and Related Story Links:
- Herald Sun:
BHP's move on Rio Tinto looms
- Money Morning:
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