Rio Tinto rejects improved bid from BHP Billiton
Rio Tinto has rejected an improved offer from BHP Billiton to acquire all of its shares, saying that the offer of some $147.4 billion - up $27.4 billion from the last - still undervalues the company.
Rio Tinto has rejected an improved offer from BHP Billiton to acquire all of its shares, saying that the offer still undervalues Rio Tinto.
On 6 February, BHP Billiton announced that it intended to offer to acquire the whole of the issued share capital of Rio Tinto at an exchange ratio of 3.4 BHP Billiton shares per Rio Tinto share. The offer, which came just hours before the deadline set by the UK takeover regulator for the company to formalize its bid or walk away from the deal for six months, is worth some $147.4 billion.
Don Argus, chairman of BHP Billiton, said: "This combination of two industry-leading companies provides a unique opportunity to create a truly unparalleled resources company." He added, "We are firmly of the view that the terms of the offer announced today are compelling and reflect our absolute conviction in the strength of this combination which has convinced us to make this offer directly to Rio Tinto's shareholders."
BHP Billiton and Rio Tinto are both dual-listed companies with separate listed parent entities in the UK (BHP Billiton plc and Rio Tinto plc) and Australia (BHP Billiton Ltd and Rio Tinto Ltd). BHP Billiton Ltd is making inter-conditional offers for all of the Rio Tinto plc and Rio Tinto Ltd shares.
In November 2007, after months of speculation, BHP Billiton - the world's largest mining company - launched a takeover bid for Rio Tinto - the world's third largest miner. BHP Billiton proposed offering three of its shares for every one Rio Tinto share - amounting to about $140 billion at the time. However, Rio Tinto rejected the bid saying it was too low.
Rio Tinto said that its board had concluded that the new pre-conditional offer still significantly undervalues Rio Tinto and therefore had unanimously rejected BHP Billiton's pre-conditional offer as not being in the best interests of shareholders. Under the terms of the new offer, Rio Tinto would hold 44% of the merged company, up from the 36% under the terms of the initial offer.
Rio Tinto's chairman, Paul Skinner said: "BHP Billiton's offers, while improved, still fail to recognise the underlying value of Rio Tinto's quality assets and prospects. Our plans are unchanged, and will remain so unless a proposal is made that fully reflects the value of Rio Tinto. Accordingly we are forging ahead with our strategy of operating and developing large scale, long life, low cost assets to generate significant value for shareholders".
Rio Tinto's CEO Tom Albanese said: "Rio Tinto has an exceptional portfolio of assets and significant stand alone growth opportunities, particularly in iron ore, copper and aluminium. These assets and opportunities, combined with the company's strong track record for value delivery, project execution and successful exploration means Rio Tinto is very well positioned to take advantage of strong global markets and the growth in the resources industry, maximising value for shareholders."
A merger between BHP Billiton and Rio Tinto would create a $360 billion company involved in a range of industrial-use commodities, including copper, aluminium, iron ore, coal and uranium.
BHP Billiton owns the Olympic Dam project in South Australia, where uranium is produced as a by-product of copper production. Rio Tinto has interests in two uranium mines: Energy Resources of Australia Ltd (ERA) in Australia (68% interest) and Rossing in Namibia (69% interest).
