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BHP Billiton pushes for Rio deal despite rebuff
Allan Seccombe
Posted: Thu, 08 Nov 2007

[miningmx.com] -- RIO TINTO'S share price rocketed up by a third on Thursday after BHP Billiton confirmed market speculation it had approached Rio to combine their assets, but had been rebuffed. It is now requesting a meeting with the board to further discuss the proposal.

“BHP Billiton now confirms that it recently wrote to the Board of Rio Tinto outlining a proposal in relation to a potential combination with Rio Tinto on terms incorporating a premium, reflecting its confidence in the benefits for both sets of shareholders of such a transaction,” BHP Billiton said in a statement on the London Stock Exchange news service.

BHP Billiton, the world’s largest resources company, said it had examined in detail the regulatory issues and other practicalities of a combination. There are likely to be competition issues that might prevent such a tie up of assets particularly around iron ore.

A combined company would have iron output similar to that of world number one CVRD and would be in a similar position with copper, rivalling Chile's Codelco for the number one spot, Reuters reported, estimating their combined iron ore output at 227.2 million tonnes. Combined mined copper production would be 1.7 million tonnes, or 13% of the world total.

The company would account for around 6.6 percent of world primary aluminum production and 9.75 percent of alumina output.

"In its letter, BHP Billiton sought to pursue discussions with Rio Tinto regarding its proposal. Rio Tinto rejected the proposal,” BHP Billiton said.

BHP Billiton had proposed an exchange rate of one Rio share for three of its shares, Rio said. The value of that at Thursday's prices is about $140bn. It would create a company worth some $360bn.

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“The Boards of Rio Tinto have given the proposal careful consideration and concluded that it significantly undervalues Rio Tinto and its prospects. Accordingly, the Boards have unanimously rejected the proposal as not being in the best interests of shareholders,” it said in a statement.

BHP Billiton has subsequently written to the Rio board, requesting a meeting to pursue the combination of assets, said spokeswoman Bronwyn Wilkinson.

"We continue to look for an opportunity to meet them and discuss the proposal. We have written to them again," she told Miningmx.

Rio's shares were last up 27% at £55.29, off an intraday high of £57.40. BHP Billiton's shares came down 2.45% at £17.13.

Rio is one of the major producers of aluminium, copper, diamonds, coal and uranium, gold and iron ore. BHP Billiton is the third-largest copper and nickel supplier, and the second-biggest exporter of energy coal. It is number six in aluminium manufacture and one of the top five uranium producers.