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From The Sunday Times
February 3, 2008

Chinese gear up for Rio Tinto battle
The Chinese government has put a £60 billion war chest at the disposal of Chinalco as it prepares to battle with BHP Billiton over Rio Tinto
Click to expand...

The money would be made available through CIC (China Investment Corporation), the sovereign wealth fund behind Beijing’s recent investments in the Wall Street firms Blackstone and Morgan Stanley

http://business.timesonline.co.uk/tol/business/
 
theyve already bought %12, and "reserve the right to buy more shares" if BHP puts a bid forward.

What effect do you think this will have to both sides?
Probably better if we can just get a resolution either way. dragging it out is hurting both no?
 
The investment in RIO, in the London Stock Exchange part of the company "Rio Tinto PLC", was given the Green Light after U.K. Prime Minster Gordon Brown visited China recently. He said Britain welcomed investment by China in their Country.
 
My 2c.

From the Chinese perspective, their objectives seem to be, first and foremost, be a spoiler to the BHP-RIO merger because regardless what promises BHP had given them, in the long run, the merger will almost certainly make BHP and Vale into a duopoly in the iron ore market.

As a big consumer in this market, this is extremely bad news for the Chinese, especially when their country is going through a rapid pace of growth, the consumption of iron/steel will only increase in the next 10 or 20 years. The merger will certainly strengthen the bargaining power of both the producers whilst greatly reduce the consumers' - it will be most silly of them if they do not act and let it happen.

Secondly, preservation of their US$ reserve value by investing in commodity, in this case, RIO probably is one of the better way in achieving this goal. It makes a lot of sense especially when the USA has clearly indicated they intend to reduce interest rate to combat recession. The speculative end of the market is anticipating a target rate of 2 - 2.5% in 6 months time. The more they offload their US$ into hard assets, the better it would be.

With these considerations, one has to ask what is the chance of success for BHP?

In my view, in the current proposal, ZERO!

Barring any political pressure from the EU to the Australian government, on pure commercial considerations, China will not give up their holding in RIO and let BHP succeed in this merger. Not when they know the stake is this high and has such long devastating effect on their country as a whole. The Chinese communist central government will make sure the stake in RIO won't be given up so easily.

For that matter, the Chinese will probably raise their holding in RIO if BHP were to turn hostile and aggressive in their bid. Now that the Chinese' move is out in the open, the basic message is quite clear, especially to BHP - they want to have their say in the matter and they are not going to be a passive bystander. And they have plenty of cash! Over a trillion! Ok, may be not all of them, but at least there are 200 billions in stand by.

I can't see how BHP can succeed under this circumstance, especially when they are making an all script offer. In terms of cash or buying power, they are the weaker side. In terms of synergy, appealing to the share holders, etc, the Chinese and their partner are one happy RIO share holders and they won't sell!

Other possible scenarios:

1) RIO makes a reverse take over of BHP. With the Chinese backing, I won't rule this out. Especially when Gordon Brown has appealed to the Chinese to invest in UK in his recent visit to China, this will make a good test case for both governments.

2) BHP invites the Chinese to take a substantial stake in the company, in the process, buying over their stake in RIO. There may be added sweetener for the Chinese, like guarantee supplies for the next 20 years at certain control price increment.

(This has the potential of antagonizing the Japanese and the S.Korean).

3) Others, if you know, you can tell us.

Cheers.
 
"The Chinese communist central government will make sure the stake in RIO won't be given up so easily.

For that matter, the Chinese will probably raise their holding in RIO if BHP were to turn hostile and aggressive in their bid."


BHP can't go hostile if the Chinese govt has >10% and wants to block the merger. Their chance, which is far from 0%, is via a scheme of arrangement
 
stoxclimber said:
"The Chinese communist central government will make sure the stake in RIO won't be given up so easily.

For that matter, the Chinese will probably raise their holding in RIO if BHP were to turn hostile and aggressive in their bid."


BHP can't go hostile if the Chinese govt has >10% and wants to block the merger. Their chance, which is far from 0%, is via a scheme of arrangement
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I tend to agree and will be switching a fair bit of RIO exposure to BHP tomorrow.

In the broader context this is a stunning vote of confidence for the resources cycle from those driving it.

Further, this must be an even bigger vote of confidence for the Aluminium price and the effect the global energy squeeze is going to have on its price.
 
China ready to block BHP deal in court

The Observer, Sunday February 3 2008


last updated at 00:02 on February 03 2008.

The Chinese government is preparing to launch an unprecedented legal challenge against BHP's planned $130bn takeover bid for Rio Tinto. High-ranking officials from the Chinese embassy in London have been approaching top City law firms over the past month for help in blocking what would be the world's second-largest takeover.

Beijing has recently drawn up framework legislation for the country's first competition law. Once passed, the Chinese government wants to use it to mount its first legal challenge to a foreign takeover. The legal moves are part of a two-pronged attack on BHP, which has until Wednesday to table an offer for Rio or walk away for six months.

On Friday, state-owned Chinalco launched a dramatic dawn swoop on Rio, buying a 12 per cent stake for $14bn. The stake is not large enough to prevent BHP from bidding for Rio, but it enables the Chinese to influence the outcome of any BHP bid.

Chinalco said it might also launch a takeover bid to counter any offer made this week by BHP. But analysts said this weekend that such a move was unlikely, believing that it would be blocked by regulators in Australia, where BHP and Rio Tinto are based.

Beijing is concerned that a combination of Rio and BHP would control over a third of the world's seaborne exports of iron ore. China is the world's largest steel-producing country, and so is heavily dependent on ore imports.

Chinese embassies elsewhere in Europe and in the US have also been seeking advice on ways of blocking the takeover. China's embassy in London did not return calls.

Mike Pullen of law firm DLA Piper said: 'Rio and BHP may not have any assets in China but the Chinese government would argue that a takeover would affect its domestic market. There's no precedent to such a challenge.'

An offer for Rio by BHP could also trigger a lengthy investigation by the European Commission and possibly US and Australian authorities as well.

Pullen admitted it was not clear which jurisdiction would prevail if different conclusions were reached in the different investigations: 'There is no guarantee that all the competition authorities will come to the same verdict.'

Bankers working for BHP were this weekend scrambling to examine whether a bid for Rio was still feasible. Neither BHP nor Rio has yet held a meeting with Chinalco, and neither company is sure about the intentions of the Chinese. BHP is still expected to make an offer, but analysts say it would have to at least match the price Chinalco paid for its stake on Friday.

One top-10 UK-based Rio shareholder, who asked not to be named, is urging the Chinese and BHP to discuss how they can work together to break Rio up: 'A BHP-Rio deal is a deal that should be done. Chinalco's move was quite aggressive. There will have to be some element of kite-flying between the Chinese and BHP to see if there is anything worth doing anything together.'

http://www.guardian.co.uk/business/2008/feb/03/mining.china[/URL]
 
Dam chinese want to ruin everything.

If I were BHP i'd say get out of our way else we want our metals we donated for the olympics
 
Aussie listed BHP is trading it a very significant discount to the British counterpart.

What a weak performance by both Rio and BHP today compared to the 12 & 10% done on London overnight, oh well just makes it a sexier buying opportunity :).
 
vishalt said:
Aussie listed BHP is trading it a very significant discount to the British counterpart.

What a weak performance by both Rio and BHP today compared to the 12 & 10% done on London overnight, oh well just makes it a sexier buying opportunity :).
Click to expand...

Maybe british investors have more common sense than Australian investors, or maybe Australians are more chicken when it comes to investing in stocks.:confused:
 
Re-post from the thread: What will happen to BHP and RIO after Feb 6th?

Chinalco ready to sell
Updated: 08:04, Tuesday February 5, 2008
Chinalco, Rio Tino's newest major shareholder, has confirmed it is prepared to sell its 12 per cent stake in the company, to BHP Billiton.

That's if it makes money on the deal.

The company says the purchase was a strategic investment to diversify its options and won't interfere with Rio management.

The buy was made in London because of market liquidity and in terms of timing the decision was made based on price.

The fact that it came close to BHP's deadline to formalise its bid for Rio was pure coincidence.

It's also confirmed it has no future plans to increase its 12 per cent stake in Rio, although it is looking at other Australian investments.

On the sector as a whole, Chinalco executives say they see strong demand and prices for metals and that the general global outlook is strong.


===========


Sounds like good news for BHP to me.
 
hartley said:
Re-post from the thread: What will happen to BHP and RIO after Feb 6th?

Chinalco ready to sell
Updated: 08:04, Tuesday February 5, 2008
Chinalco, Rio Tino's newest major shareholder, has confirmed it is prepared to sell its 12 per cent stake in the company, to BHP Billiton.

That's if it makes money on the deal.

The company says the purchase was a strategic investment to diversify its options and won't interfere with Rio management.

The buy was made in London because of market liquidity and in terms of timing the decision was made based on price.

The fact that it came close to BHP's deadline to formalise its bid for Rio was pure coincidence.

It's also confirmed it has no future plans to increase its 12 per cent stake in Rio, although it is looking at other Australian investments.

On the sector as a whole, Chinalco executives say they see strong demand and prices for metals and that the general global outlook is strong.


===========


Sounds like good news for BHP to me.
Click to expand...


Maybe not ...

IF BHP end up 'over paying', at least in the eyes of investors ... that would be awful for share price - & now it looks like they're going to be over paying for at least 12%
 
That's if it makes money on the deal - I think this line says it all.

How much will they be happy to sell?

The easy conclusion here is BHP is going to overpay for a whole lots of dirt. M&A at a market top has always ended in misery. This time is no difference.

Cheers.
 
Nyden said:
Maybe not ...

IF BHP end up 'over paying', at least in the eyes of investors ... that would be awful for share price - & now it looks like they're going to be over paying for at least 12%
Click to expand...

I don't know much about the whole takeover deal thing but if BHP shares take a dive what's to stop Chinalco buying them up on the sly?

I wouldn't take this whole scenario at face value.....
 
Man the chinese are saying it was pure coincidence... which I say is BS.

They played it smart, they didnt want to lose on a chance of making money.. pure greed.

Now greed is going to stop them from selling that 12%. I would prefer as a BHP holder for BHP to walk away and watch RIO drop.
 
Fed23 said:
Man the chinese are saying it was pure coincidence... which I say is BS.

They played it smart, they didnt want to lose on a chance of making money.. pure greed.

Now greed is going to stop them from selling that 12%. I would prefer as a BHP holder for BHP to walk away and watch RIO drop.
Click to expand...

Yes, walk away for now and watch RIO drop and let the opportunistic Chinalco take a loss, at least on paper.

There will probably other chances down the track for BHP to acquire RIO.
 
I dont think the senior management at BHP will overpay, they will/have run the rule over RIO, factor in savings/synagies to be achieved for a merged BHP/RIO and increase the offer accordingly.

IMO, they never expected the initial 3 for 1 offer to be accepted, it was just the opening bid to feel the water so to speak.
 
Fed23 said:
Man the chinese are saying it was pure coincidence... which I say is BS.

They played it smart, they didnt want to lose on a chance of making money.. pure greed.

Now greed is going to stop them from selling that 12%. I would prefer as a BHP holder for BHP to walk away and watch RIO drop.
Click to expand...

Trust me the chinese can afford RIO, to them it's just pocket change. This 12% stake is only the begining from the chinese to try and make sure that no one has a monopoly over the global iron ore supply; iron ore they need to keep up with their demand.
 
Besides that boys, tomorrow will be a day to rejoice as BHP will probably post the biggest 1H profit in Australian history.

I'm tipping oil and copper as the biggest profit chippers with maybe a surprising boost to the dividend + share buybacks.

I'm tipping that there will be atleast a formal offer from BHP for Mr. Tinto, so I'm buying up small in Rio but if it fails I have a stoploss.

Good luck to BHP & Rio shareholders, hope we both come out of this as winners!
 
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