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Rio Tinto: BHP underestimates us
2 December 2007Market cost of one of leading world mining companies Rio Tinto Ltd. remains above the offer competing BHP Billiton Ltd. about merge for 138 billion dollars.
Rio Tinto’s managers say that the market estimates them considerably above the offer which they have refused. Thus it has not been specified what the market cost of the company is.
Rio Tinto’s executive director has also denied hearings that there is certain “base agreement” in occasion of that merge is favorable to both companies. He also would name consensus or the agreement. That fact, that Rio Tinto has been estimated below market cost, was the sufficient reason for refusing the offer.
Meantime BHP Billiton believes, that Rio Tinto will agree on merge. At recent annual assembly of company management BHP Billiton’s executive director has informed, that investors consider the offer “logical”. Thus he has expressed hope, that BHP Billiton’s positions in the world market will become stronger in the near future owing to the high prices for metals.
Let’s remind, that on November, 8th, 2007, BHP Billiton has informed that the offer on purchase, which subsequently has been rejected, has been directed to Rio Tinto’s board of directors. On November, 12th, BHP Billiton has promulgated details of the offer in the form of shares’ exchange in the ratio 3 to 1, which total cost, proceeding from shares’ market cost on November, 9th, 2007, was estimated in 138,1 billion dollars. BHP Billiton has also declared about the plans of returning shares’ repayment to shareholders of the incorporated company for the sum of 30 billion dollars. After end of merge BHP Billiton is hoping for synergistic effect at the rate of 3,7 billion dollars a year from purchase of Rio Tinto.
BHP Billiton is the world’s largest mining company, whereas Rio Tinto takes the third place in world mining sector. In 2006-2007 financial year, which came to the end on June, 30th, 2007, BHP Billiton’s net profit has grown on 28,4 % - up to 13,42 billion dollars; during the same period Rio Tinto’s net profit has decreased on 14 % - up to 3,25 billion dollars.
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