# BHP drops bid for RIO



## M34N (25 November 2008)

Just hit the news wire:

BHP drops bid for Rio
http://business.theage.com.au/business/bhp-drops-bid-for-rio-20081125-6hcf.html



> In a move which will stun the sharemarket, BHP Billiton has tonight effectively abandoned its $US66 billion ($103 billion) offer for Rio Tinto.
> 
> At a board meeting today, BHP decided that completing the deal would no longer be in the best interest of its shareholders, despite having spent 18 months and $US450 million in fees on the transaction to date.


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## agro (25 November 2008)

i am tipping a buy back now


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## sammy84 (25 November 2008)

Wow, didn't see that coming. This cant be good news for the SP of RIO in the short term.


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## agro (25 November 2008)

sammy84 said:


> Wow, didn't see that coming. This cant be good news for the SP of RIO in the short term.




Bad news for RIO

good for BHP


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## mayk (25 November 2008)

It might be good news for small miners/explorers. As BHP might now start absorbing them. 


RIO will be slaughtered tomorrow...


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## Nyden (25 November 2008)

agro said:


> Bad news for RIO
> 
> good for BHP




Are you entirely sure it's good news? There have been arguments for both sides; as to whether or not it's good. Only the market can determine if the news is good, and I guess we'll find out tomorrow.

I'm more pessimistic - and believe that a lot of BHP buyers wanted the enormously influential company that would eventuate from the merger; these folk could be sorely disappointed.


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## agro (25 November 2008)

mayk said:


> It might be good news for small miners/explorers. As BHP might now start absorbing them.
> 
> 
> RIO will be slaughtered tomorrow...




FMG is out of the picture - Twiggy has a 36% stake

what are you thinking?

OZL? 

Iron ore/Coal plays like Aquila?


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## Nyden (25 November 2008)

mayk said:


> It might be good news for small miners/explorers. As BHP might now start absorbing them.
> 
> 
> RIO will be slaughtered tomorrow...




I thought BHP's intentions were just the opposite - to sell off smaller assets, and to obviously buy enormous ones.

At any rate; this will certainly make for an interesting day tomorrow.


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## mayk (25 November 2008)

agro said:


> FMG is out of the picture - Twiggy has a 36% stake
> 
> what are you thinking?
> 
> ...




They will not make decision now in haste. They will re-evaluate the whole global picture and make the decisions accordingly. 

I think there are a lot of potential resource companies and I will not like to speculate, as everyone want their company to be bought by BHP. 

I agree with Nyden, it might not play well in some people's mind as half a billion is spent in this wild goose chase. They could have snapped a couple of small miners...

Lastly I have more respect for the CEO and chairman, at least they left their egos aside for a while and took the market situation into account. 

It might have something to do with European Union not approving the takeover. This must be evident to many and hence the discount price for RIO lately.


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## Mofra (25 November 2008)

This could be a very strategic move aimed at picking up smaller players, hasteniong the consolidation of producers in the industry. There have been a few articles stating most mining mid caps are trading on cash value alone, with mine values priced by the market as near zero - this wont escape the intention of BHP's management team. 

Just when you wonder if the current market can get any more interesting - bang!


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## skc (25 November 2008)

The share price ratio between BHP and RIO already showed this was going to happen. The bid was pitched at 3.4 BHP to 1 RIO share, yet they traded recently at ratio of 2.4-2.5. The huge debt on RIO probably also caused the bid to be dropped.



Flyer said:


> I recommend you read Robert Gottliebson's article "The Big Owe" http://www.eurekareport.com.au/iis/iis.nsf/pages/C1BC0964167542C1CA25750B001F5700?OpenDocument




Anyone pairs trading (long RIO, short BHP) will have to unwind their positions if they haven't done so already.


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## M34N (25 November 2008)

I think people are right about the bid being tipped to fail, the price of Rio seemed to come back down heavily in the past few weeks.

Eagerly watching the prices of both stocks in London to see where they go. I'm with Nyden here, probably bad for both stocks, but you never know in this market. Also depends on whether BHP do a buyback now, like agro said.


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## M34N (25 November 2008)

Even Michael West (from The Age) agrees with what's already said:

BHP capitulates to the inevitable
http://business.theage.com.au/business/bhp-capitulates-to-the-inevitable-20081125-6hcz.html



> BHP always claimed its takeover of Rio was even more compelling in a bad market. Clearly that wasn't the case.
> 
> It has just canned its $US66 billion ($103 billion) scrip offer even before it was due to go live in January. Rio shares will tank, BHP will fall, though not as far.
> 
> ...


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## drsmith (25 November 2008)

M34N said:


> I think people are right about the bid being tipped to fail, the price of Rio seemed to come back down heavily in the past few weeks.
> 
> Eagerly watching the prices of both stocks in London to see where they go. I'm with Nyden here, probably bad for both stocks, but you never know in this market. Also depends on whether BHP do a buyback now, like agro said.



BHP up 12%.

RIO (deap breath) down 35%.


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## sam76 (25 November 2008)

drsmith said:


> BHP up 12%.
> 
> RIO (deap breath) down 35%.





ouch.


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## Prospector (25 November 2008)

FMS :thankyou:  RIO down 36%.


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## M34N (25 November 2008)

drsmith said:


> BHP up 12%.
> 
> RIO (deap breath) down 35%.




Looks like a share buyback for BHP is being priced into the market now, if going by the London listing.

But down 35% for Rio? If that is reflected here, that's roughly a price of $42 or thereabouts. IIRC, BHP was trading close to that price only a few months ago.


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## cutz (25 November 2008)

Hi everyone,

For those of you that closely follow BHP, will tomorrows aussie listing move in step with london all else remaining equal.


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## jackson8 (25 November 2008)

for those of you interested in the eto side of things check out rio's november call sales ............with two days to go someone is going to make some decent $ and some will be crying in their soup especially if drops below $50 for next two days


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## grace (25 November 2008)

I thought it was Kloppers ego being fulfilled going for RIO.  

Now I'm happy.


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## Miner (25 November 2008)

grace said:


> I thought it was Kloppers ego being fulfilled going for RIO.
> 
> Now I'm happy.




OK
What do you say about the strong recommendation by Charlie Aitken (the great proponent of FMG), Alan Kohler, Robert Gott who all advocated why BHP and RIO merger should be good for economy ?

What were their motivation - just becoming lap dog of Kloppers


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## CAB SAV (26 November 2008)

Looks like the Chinese who bought the blocking stake of 9% in RIO will be able to pick up a big slice of it for SWA and have a long cheap supply of iron ore for decades which may not help others.


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## grace (26 November 2008)

Miner said:


> OK
> What do you say about the strong recommendation by Charlie Aitken (the great proponent of FMG), Alan Kohler, Robert Gott who all advocated why BHP and RIO merger should be good for economy ?
> 
> What were their motivation - just becoming lap dog of Kloppers




Actually, I recall Alan Kohler (held BHP shares at the time) commenting that he did not like the takeover when it was first announced as he did not own RIO shares, and was initially quite negative about it.  He commented that the price was too high.


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## Johno (26 November 2008)

Im very new to the share market which will be evident in my posts pretty quick

But im confused as to why its considered a good thing for a company to be taken over by another. To me, the 3.4 for 1 offer by BHP doesnt seem worth it for Rio share holders. If Rio shares were worth roughly 3 times or more than BHP, then whats the point?

Also as soon as they took over Rio, BHP's share price would immediately drop while the merger flitered through which would take years to sort out.

I mainly stayed away from Rio because they have more debt than what i feel comfortable with atm. But the other reason was that i thought there is better value elsewhere because of the above things ive mentioned. I also steered clear of BHP until about 2 weeks when i gave in and bought some. Now im glad the merger didnt happen because for now i think BHP are far better off without them.


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## skyQuake (26 November 2008)

It would be so much easier now for BHP to throw in a cash bid for RIO again (unlikely) or some other assets which are literally at bargain basement prices.
RIO is so stuffed today, but BHP weighs so much more in the index that it'll probably offset the RIO fall and then some.


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## Miner (26 November 2008)

grace said:


> Actually, I recall Alan Kohler (held BHP shares at the time) commenting that he did not like the takeover when it was first announced as he did not own RIO shares, and was initially quite negative about it.  He commented that the price was too high.




Grace

Thanks . I will double check my record and hope you are right here. That will bring my faith back on Alan Kohler.


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## sails (26 November 2008)

Neither BHP nor RIO seem to be trading - can't find any information about a trading halt.  Does anyone know what's happening?


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## Frank D (26 November 2008)

Pre-open for both 10:50
Open for Both 11:00


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## sails (26 November 2008)

Frank D said:


> Pre-open for both 10:50
> Open for Both 11:00




Thanks Frank - still no news report on it in Iress...


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## Johno (26 November 2008)

Ummm is my broker lying to me or did Rio just drop by 35% in about 5 minutes? Thats gotta be some kind of record.


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## Mr Capital (26 November 2008)

Johno said:


> Ummm is my broker lying to me or did Rio just drop by 35% in about 5 minutes? Thats gotta be some kind of record.




He isn't lying, massive drop


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