BHP Private Equity Takeover!!

[nizar]

THE RATINGS GAME
Merrill Lynch suggests private-equity BHP bid
Broker doesn't say bid is likely, but argues it's possible
By Steve Goldstein, MarketWatch
Last Update: 5:28 AM ET May 4, 2007


LONDON (MarketWatch) -- Merrill Lynch analysts in Australia say the mining sector is looking lonely, with private-equity action all around.

The analysts said in a note they don't see why leveraged buyout firms shouldn't take a crack at buying into metals extractors, even though the likes of Kohlberg Kravis Roberts have been reticent in the past to take on a cyclical industry.

"We are believers in the 'super cycle' and expect commodity prices to stay above historic averages for years to come. Therefore, it seems to us inevitable that private equity attentions will turn to the mining sector," said a note authored by Vicky Binns and Duncan Hay.

They're quick to note that they don't see a leveraged buyout of a metals firm around the corner.

With a market capitalization of over $87 billion, a leveraged buyout of BHP Billiton would be, by far, the world's largest ever.

But Merrill's math suggests they could be bought, if buyout firms teamed with an industry partner like Xstrata or CVRD

"Private-equity investors require 6% to 8% return on equity above the highest cost of debt over three years -- we calculate a 20% internal rate of return. The returns from our scenario on a bid for BHP on our assumptions are over 30% over three years. In addition, we calculate with the single sale of (BHP's) petroleum division, a $25 billion gain on market value is achievable in a short time period," they said.

BHP's cash generation covers the pre-tax interest bill of private-equity firms, they noted.

Merrill still has a neutral rating on BHP.

"We view BHP favorably as a bottom drawer stock -- hold it and forget it through volatility to educate your children. It is a company with low cost, long life, diversified assets with growth that many of its competitors envy," the broker said.

BHP rallied in both London and Sydney trading on Friday, though rival diversified miner Rio Tinto gained even more. See London markets.
Steve Goldstein is MarketWatch's London bureau chief.

http://www.marketwatch.com/news/sto...x?guid={E8C94D75-38A9-4910-AAA0-C120AE3A9E07}

If I had the cash, I would do it. Then break it up into BHP Uranium, BHP Petroleum and BHP Metals, etc, etc.

This speculation should fire up our markets next week at least on monday

 

[nizar]

Come on guys, 48 views and not one reply... !!
Isnt this pretty interesting..

Lets try to put an appropriate market cap on say, BHP uranium... well from a point of view of inground value of olympic dam, well, i think that would be too many zeros! LOL

But their plans if im not mistaken is 10,000tonnes of uranium by 2013... and a mine life, maybe 100 years? There still 17rigs that have been drilling for more than 1 year, and i think some updates are being released soon...

But 10,000t thats 22million pounds, a fair multiple of PDN, and PDN is 5billion market cap... Hmmmm.... and Yillerrie potential as well.....

It would be interesting....

 

[astroboydivx]

It would not pass the Foreign Investment Review Board, due to it being against the national interest.

Qantas is one thing, but BHP - not a chance.

 

[Knobby22]

It's not strictly an Aussie company anymore, so the takeover would be difficult to block.

I thought of BHP as a private equity takeover a while back, it is cheap at the moment. It could happen. It is a much better buy than a standard mining company as it has oil and uranium, energy stocks.

 

[Sean K]

If I had the cash, I would do it. Then break it up into BHP Uranium, BHP Petroleum and BHP Metals, etc, etc.

I'll chip in Nizar. Who will we use as advisors? YT might be in too.

 

[Uncle Festivus]

I don't think any company is immune anymore, in this climate. Maybe WPL is back on the agenda too; but I'd like to have a go at Wesfarmers if I was a private equity dude.

 

[wayneL]

I'll chip in Nizar. Who will we use as advisors? YT might be in too.

LOL

I've done a quick scout around the house and have managed to scrounge up $7.35.

I'M IN!

 

[Kimosabi]

LOL

I've done a quick scout around the house and have managed to scrounge up $7.35.

I'M IN!

WayneL, why on gods green earth would you use you own money I went and saw the bank and they lent $7.35...

 

[Rafa]

remember, you can borrow the rest anyway... its always leveraged buyouts. tho 99.99% leverage may be a bit too much

 

[wayneL]

WayneL, why on gods green earth would you use you own money I went and saw the bank and they lent $7.35...

It was the Mrs' money

But great idea! I've got a mate who's a soft touch for $20.

 

[billhill]

What about China? If BHP is really a private equity target wouldn't china also be taking a look. It has probably more value to china then what the private equity guys could get out of it.

 

[Julia]

It was the Mrs' money

But great idea! I've got a mate who's a soft touch for $20.

Wayne,

I'll be generous enough to offer you a loan of a whole $100 (at a usurious interest rate, of course.)

 

[wayneL]

Wayne,

I'll be generous enough to offer you a loan of a whole $100 (at a usurious interest rate, of course.)

oooooooooh! You capitalist! LOL

 

[stoxclimber]

I'd be suprised. It's not a typical target. That said, there's so much money that its got to go somewhere.

 

[wayneL]

Off-topic re BHP but on-topic re LBO's

http://www.comstockfunds.com/index....t Commentary&newsletterid=1302&menugroup=Home

The last para\/

All of these prior "excess liquidity" situations by leveraging companies up with debt had an ugly ending, and we suspect this one will not be an exception. Take a look at the attached charts showing "excess debt" not "excess liquidity".

* Total Credit Market Debt as a % of GDP
* Total Credit Market Debt as a % of the Economy (GDP)
* Private Domestic Non-Financial Debt as a % of GDP