BHP drops bid for RIO

[M34N]

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.

 

[agro]

i am tipping a buy back now

 

[sammy84]

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

 

[agro]

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

 

[mayk]

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


RIO will be slaughtered tomorrow...

 

[Nyden]

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.

 

[agro]

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?

 

[Nyden]

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.

 

[mayk]

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

what are you thinking?

OZL?

Iron ore/Coal plays like Aquila?

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.

 

[Mofra]

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!

 

[skc]

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.

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.

 

[M34N]

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.

 

[M34N]

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.

Already the pricing on the deal was skewed in anticipation of BHP chair Don Argus and his board pulling their grand plan for unrivalled global dominance in commodities.

Not having to strap on Rio's $US40 billion in Alcan debt alone is cause for share price celebration on the part of BHP shareholders.

That the European regulators were against the deal on competition grounds and chasing BHP for divestments in iron ore and coal was a sideshow.

In this dreadful market environment too much debt is a bad thing, a very bad thing.

Rio had already been bringing forward its asset sales program to retire debt. Even three months ago it made more sense for BHP to go it alone. Buying its own shares made more sense.

The impending collapse of credit-starved mining projects around the world will make tasty pickings for any big miner with cash, shares which trade at a premium and a decent balance sheet. This is good news for BHP.

Even the case for merging and forcing through higher prices for the likes of Chinese steel makers lost its glamour once Chinese demand began to ebb.

BHP has capitulated to the inevitable. The costs of implementing such a leviathan global tie-up in a shrinking world economy would have been damaging.

And if the deal really makes sense, BHP can always come back in a few months or a few years.

 

[drsmith]

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%.

 

[sam76]

BHP up 12%.

RIO (deap breath) down 35%.

ouch.

 

[Prospector]

FMS :thankyou: RIO down 36%.

 

[M34N]

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.

 

[cutz]

Hi everyone,

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

 

[jackson8]

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

 

[grace]

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

Now I'm happy.