Replies to post #26236 on Abet Chichi2 (Chichi2)

[EZ2]

What are your thoughts on the Rio/BHP situation ?

Good (short) article on it in this mornings WSJ....
could be some upside in one or both of those plays.......
just not sure which/where/when!!

:-)
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Mining
Rio Tinto's $128 Billion Question
By ROBERT GUY MATTHEWS and JASON SINGER
November 24, 2007; Page A2

Monday, mining giant Rio Tinto PLC is expected to explain to its investors why they should reject BHP Billiton PLC's $128.48 billion all-stock takeover offer and back Rio's own strategy for growth.

Other than insist that the bid is too low -- a stance the market apparently agrees with, given that Rio Tinto's shares are trading well above the value of BHP's offer -- Rio Tinto has said little. The loudest critics have been big iron-ore consumers, chiefly steelmakers. They are concerned that a combined BHP-Rio Tinto would monopolize the market, particularly in high-consumption regions of the world, such as Asia, and wield too much power over price.

Using a previously scheduled investor meeting as their forum, Rio executives are expected to highlight the value of its sprawling portfolio of assets, including the future value of mines and other investments that will soon begin producing returns for shareholders after years of expense, according to people close to the matter.

In developing its defense to BHP's unsolicited approach, Rio's board is being careful to leave options open, and would consider a takeover that took into account its future earnings, these people said. Specifically, Rio is expected to show investors that its recent $40 billion acquisition of Alcan Inc. is worth more than the market has been wagering. Many investors say Rio overpaid, weighing down its shares.

While Rio has been mum, BHP executives have been meeting with shareholders in Australia, the U.K., Europe, Asia and the U.S. BHP and Rio have an unusually large number of shareholders in common -- at least 50% -- making it easier to present its case. Alex Vanselow, BHP's chief financial officer, was in New York this week, arguing that both companies are pursuing the same strategies for growth and going after the same assets, which makes potential synergies greater.

For example, both have mines in the same area of mineral-rich Australia. BHP has higher-quality iron ore, which fetches a higher price, while Rio has better rail service. "We produce more and they can move more," he says.

Some steelmakers accept the logic. Korea's second-biggest steelmaker, Hyundai Steel Co., says it doesn't see anything wrong with the potential linkup. Marius Kloppers, BHP's chief executive, has been in Korea this past week telling steelmakers there will actually be more iron ore available, which could lower prices.

The world's biggest steelmaker by output, ArcelorMittal, which buys about 50% of its iron ore on the market, isn't taking a position either way -- amounting to tacit approval of the proposed linkup, some steel analysts say. At least one Rio manager has already left the company and is expected to join BHP to head a large metals division.

Investors, though, are clearly waiting to hear more from both companies.