Markets have begun to price in these synergies already. PE ratios are close to useless for valuing mining companies - you might want to think about how you would begin to measure the value of the massive growth in iron ore volumes of both RIO and BHP with PE.But will BHP double in the next year, I would highly doubt it. Why? Investors will view the RIO takeover originally as much too expensive considering the high PE multiple they would be paying for the company. The benefits from the takeover will take a couple of years to show through. Lately BHP has been trading well above its historical PE average of around 12-13 x earnings.
I'm not optimistic for the next few weeks/months. The following seems to mean that for the near term, the only way is down:
a) Concerns that BHP will succeed in its takeover for RIO and overpay in the process - even if the payment is merely in the form of scrip for scrip.
b) Continuing fears about the subprime crisis affecting the world economy and leading to lower demand for commodities.
c) Leading from these 2, a view that BHP is on the way down (share price wise) which of course causes a pack mentality.
I hope I'm wrong, I really do.
What stock has NOT been trading "well above historical averages" ? - only a minority of the market, and most of them are oversold or rubbish stocks.
Imo BHP just keeps on getting cheaper and cheaper!
Markets have begun to price in these synergies already. PE ratios are close to useless for valuing mining companies - you might want to think about how you would begin to measure the value of the massive growth in iron ore volumes of both RIO and BHP with PE.
Please, at least have some substance in your response, very disappointed. Not one of you has obviously looked at how BHP has historically traded over the past few years in regards to its PE at a point in time and its historical PE (even during a period when iron ore prices have been rising strongly). Iron ore prices need to rise to cover the inflating costs hitting the mining industry; skills shortages and higher capital costs and let’s not forget the effect of the rising Australian dollar since the last contracts were singed off.
Back to PE ratios. Why are analysts so concerned then about why the market is trading above or below its average historical PE then? Or believe ANZ now represents good value because it is trading at a discount based on its PE ratio to the average PE of the other Banks? Or could it be the fact that PE ratios are actually an integral part of valuation? However don’t get me wrong they are not designed to be used in isolation and in my original post you can see this very clearly it was 1 of only 4 points made for the case of BHP being weaker over the ST. And actually I didn’t quite understand what your arguments were on the contrary; did you come up with any? Please if you are going criticise my opinion give me something with some substance or something I can learn from. At least we agree on one thing, the big picture, BHP should be a winner LT and why I continue to hold half of my orig holdings and will be buying more as the share price continues to moderately weaken over the ST.
Wall Street Journal said:There is a potential new character on the scene of the globe-spanning mining takeover battle: Pac-Man.
British mining giant Rio Tinto PLC, fighting off an unsolicited $131.57 billion takeover bid from Australian rival BHP Billiton PLC, is considering turning the tables on its rival and launching a counterbid for BHP, according to people close to the matter. The gambit is called the Pac-Man defense, and has a relatively checkered history in the annals of mergers-and-acquisitions maneuvers.
Coined after the videogame in which the pursued character can turn and eat its attackers, the Pac-Man defense still is being studied as part ...
Could RIO now make a bid for BHP??
Stranger things have happened in the past
Sometimes it all depends on who has the better friends
Was it the small BPC that took over the much larger MAY a few tears ago?
Salute and Gods' speed
Yep, BHP and RIO are doing horribly with their 70% EBITDA iron ore margins, close to the poverty line.Iron ore prices need to rise to cover the inflating costs hitting the mining industry; skills shortages and higher capital costs and let’s not forget the effect of the rising Australian dollar since the last contracts were singed off.
Oh and the thought of BHP making a bid for Rio, after Rio ate Alcan wasn't ludicrous?
That came out of the blue like an old man in a bikini, just look @ Symbio v Healthscope, and stranger things have happened anyway.
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