BHP takeover of RIO

[Lucky]

Massive!

http://www.bloomberg.com/apps/news?pid=20601087&sid=aI.icTuREgi4&refer=home

Nov. 8 (Bloomberg) -- BHP Billiton Ltd., the world's biggest mining company, said it offered to buy rival Rio Tinto Group, a proposal that was rejected.

BHP, based in Melbourne, said in a statement to the Regulatory News Service it ``recently'' wrote to the Rio board with an outline plan for a merger. BHP has again written to Rio to try to arrange a meeting. Rio stock rallied as much as 25 percent in London, while the company has a current market value of $161 billion.

``The boards of Rio Tinto have given the proposal careful consideration and concluded that it significantly undervalues Rio Tinto and its prospects,'' Rio said in a separate statement. ``The boards have unanimously rejected the proposal as not being in the best interests of shareholders.''

 

[YOUNG_TRADER]

Hey guys BHP has made a 1 for 3 script offer to take over RIO,

I reckon this is gonna put a rocket under the Aussie resource sector, hedge funds, Insto's, funds etc will all pour into the sector trying to find the next takeover target,

What are your thoughts guys?

 

[reece55]

Well, I personally don't think it will have much effect, because the two entities are clearly the largest mining entities on our ASX (and indeed rank up their worldwide) - the proposed takeover is about scale and clearly BHP isn't (in my opinion) going to bother to take over a mid cap entity (like a OXR or ZFX)...

Personally, Xstrata's takeover of JBM was more motivation than that of this transaction - however, this is just my opinion...

Cheers
Reece

 

[M34N]

Will definitely see some very heavy buying in the sector tomorrow after this announcement, will be more interested to see BHP's shares as they have fallen around 1.5% in London trading as at 11:30PM AEST. I remember when RIO had their proposed takeover of Alcan earlier in July, RIO's shares suffered losses of around 2-3% while the rest of the market was up strongly.

No doubt it will push a lot of the whole mining sector up, be curious to see how BHP shares respond here and in the US overnight. I'm mostly interested to see how gold and oil go after this announcement, they have been safe havens in the last couple weeks for traders unsure where to park their money. Doesn't look like theres been that much movement on the London Metals Exchange in the last hour.

Should be a good day for many tomorrow on the markets.

 

[YOUNG_TRADER]

Well, I personally don't think it will have much effect, because the two entities are clearly the largest mining entities on our ASX (and indeed rank up their worldwide) - the proposed takeover is about scale and clearly BHP isn't (in my opinion) going to bother to take over a mid cap entity (like a OXR or ZFX)...

Personally, Xstrata's takeover of JBM was more motivation than that of this transaction - however, this is just my opinion...

Cheers
Reece

I agree Reece,

Xstrata's move on JBM was big news as it meant anyone could be next ie OXR, ZFX, etc etc,

But BHP going after RIO will have a huge effect imo as every single hedge fund, fund and Insto will now be convinced that the resource sector is in full M&A swing,

I could be wrong though

 

[So_Cynical]

Ive got no idea what the impact will be..its prob good for the industry.

Would this make BHP the world biggest miner?

 

[M34N]

Ive got no idea what the impact will be..its prob good for the industry.

Would this make BHP the world biggest miner?

Way too late, they did that in 2000-01 when they merged with Billiton

They will become as big of a company as Microsoft, according to reports on Nine MSN.

 

[hangseng]

It will have a major negative impact on a large number of major engineering companies in Aus operating as EPCM. Mark my word on this, I would love to elaborate but can't.

People often can't see past their nose.

 

[IOT]

wow this is huge news!! can't wait to see the results tomorrorw

 

[ta2693]

This news reminds me time warner takes over AOL which end technique boom.
I am going to reduce my long position to a very comfortable level.

 

[rederob]

The fat lady is a long way from the stage.
BHP will pursue this one for all it's worth.
And it's worth more than we probably think, because BHP don't play games.
RIO board may have rejected the first "offer", but their shareholders will be liking the idea of a 20% plus price premium on a stock that has already run hard over the last few years.
The synergies of integration make considerable sense. Not only could production costs be reduced, but the entities bargaining power would be supreme. I have little doubt that BHP's move in part reflects its concerns over China's negotiating tactics with minerals/metals suppliers. If BHP can gain the whip hand, its proposed merger/takeover with RIO could pay for itself in a matter of years.

 

[eMark]

Correct me if I'm wrong......While I would like to believe that this will fire up the resources sector tommorrow (especially since Young Trader has endorsed it...opinion only of course) Aren't we forgetting something? The BHP/RIO thing may come to nothing market wise if the DOW tanks again tonight?

During the last few weeks the ASX and the DOW have been running there own shows. The ASX hasn't always followed the DOW down, unless of course you have a slide like last night. The Australian economy is going well opposed to the United States, and that's reflected in the sometimes contrasting performances.

Just a thought.

p.s. I own resource stocks

 

[vishalt]

The BHP/RIO thing may come to nothing market wise if the DOW tanks again tonight?

No it won't lol, Dow can plunge another 300 but it wonts top institutions from selling everything else and running into Rio.

 

[eMark]

No it won't lol, Dow can plunge another 300 but it wonts top institutions from selling everything else and running into Rio.

Fair enough.

What other resource stocks do you believe may benefit from the BHP/RIO situation?

 

[vishalt]

With BHP making that sort of a bid, maybe Anglo American, Xstrata, Teck Cominco and CVRD could start making hostile bids for each other?

My strategy for tomorrow:

Okay this is how it works, BHP and Rio are hand-holders who catch up to each others price, Rio always outperforms BHP in the short-term but BHP starts steaming soon after.

If you're holding Rio, DUMP IT tomorrow and buy only a few more, incase BHP makes a higher offer.

I've checked the premiums now, Rio's P/E has SURGED to 22, while BHP is still below 15, BELOW average, there is a LOT of room to make money in BHP, its a ridiculous discount.

I'm dumping Rio tomorrow and looking to buy around 2000 shares of BHP.

And hey you never know, Rio could gang up Teck/Xstrata to make a hostile bid for BHP in return - I know that sounds crazy, but BHP making a bid for Rio was NOT conceivable itself in the first place.

 

[Gekko]

This is an easy one to pick. I remember a month or so ago when BHP and Chip Goodyear did an analyst presentation at Credit Suisse in Melbourne. Chip Goodyear was suggesting that were only in the middle of this bull run and that China's internal industrialisation has only just begun - internally, BHP see China's internal expansion and thirst for raw materials lasting for another 20-30yrs.

They are surely more qualified then all of us (they speak to the customers), and have clearly PUT THEIR MONEY WHERE THEIR MOUTH IS.

IMO, this is incredible and serves to prove that Australian equities and material equities in particular will significantly outperform gloabl equities for some time yet - decades maybe.

I expect lots of overseas money to begin and continue to flow into our market for the next few months - esp off this news. Plus as YT said, Xstrat/Jubilee etc...

 

[YOUNG_TRADER]

Ummm how did Lucky hijack my thread/poll?

Its now Lucky's thread, hmmmmmmmmmmmmmmmmmmmmmmm


Also lol 2 people love lamp, lol, for those confused google "ANCHOR MAN" :

 

[Sean K]

Ummm how did Lucky hijack my thread/poll?

Its now Lucky's thread, hmmmmmmmmmmmmmmmmmmmmmmm


Also lol 2 people love lamp, lol, for those confused google "ANCHOR MAN" :

LOL. I moved his new thread to here and it changed it somehow? I'll try and fix it for you YT so you get your little poll back.

 

[Rainmaker2000]

I think it will have a massive positive effect on the Aussie sector cause it just means a leg up for the smaller players and means more Fortesques in the future.....As for BHP holders, just watch as your company exchanges its own shares with the more overpriced shares of its main rival RIO and pays incredible sums of money to the lawyers and investment bankers.....It sucks to be a BHP holder right now as any entreprenurial zeal is ripped out of BHP as it becomes much closer to a beaurocacy model of operation.....Don't believe it, answer this, if bigger is necessary better, how does a completely new company start up named Fortesque and go from nearly nothing to massive value using assets which were right under the nose of the big players........In any investment, you want to be able to double your money.......how big now does BHP have to be for you to double your money? Anyway, my 2 cents and go the Aussie Juniors

 

[Pager]

The one thing that sticks out for me is that Insider trading is alive and well, i hope the rlevent authorities will look at yesterdays trading in RIO and who were buying big parcels of the stock.