May 07, 2008
Rio Tinto shares trade at record discount to BHPB bid price
Rio Tinto`s shares in the UK and Australia are 6.9% below the all-stock offer
Rio Tinto Group shares are trading at their biggest discount to BHP Billiton hostile US$162 billion takeover bid, signaling concern among investors that the offer will fail.
Rio Tinto`s shares in the UK and Australia are 6.9% below the all-stock offer, the largest gap since the initial approach in November by BHPB.
Rio Tinto`s chief executive officer Tom Albanese has been telling shareholders around the world he can deliver better growth in commodities such as iron ore, aluminum and copper by staying independent.
"Rio Tinto has been pretty active in publicising their strengths and BHPB`s weaknesses," Peter Chilton, who manages US$1.4 billion at Constellation Capital Management in Sydney, said by phone.
"Maybe some quarters think there are some increased chances of Rio Tinto successfully fending off BHPB."
The improved offer of 3.4 BHPB shares for each Rio Tinto share, rejected in February by Albanese as too low, may also need 100 applications filed to regulators before it is approved.
Approvals are among a "raft of uncertainties" about the offer, Rio Tinto chairman Paul Skinner said last week.
Rio Tinto rose 64 pence, or 1.1% to 5,900 pence as of 11:08 am on the London Stock Exchange. BHPB gained 1.5% to 1,816 pence.
Earlier, Rio Tinto`s Australian shares gained 1.7% to close at A$138.26, while BHPB`s advanced 1.2%.
Albanese`s counterpart at BHPB, Marius Kloppers, says combining the companies will provide US$3.7 billion in savings and allow increased production to meet demand from China, the world`s fastest-growing economy and biggest consumer of metals.
BHPB is yet to lodge an application for approval to the European Commission, the European Union`s antitrust regulator, and its bid is also conditional on approval by regulators in Australia, the US and South Africa.
The commission will take representations from steelmakers who oppose the transaction. They say the proposed merger would concentrate influence over global iron-ore prices by combining the second-and third-largest exporters of the raw material.
"The regulatory process is continuing to progress," Samantha Evans, a spokeswoman for BHPB, said on Friday from Melbourne.
Rio Tinto stands by the basis on which it rejected BHPB`s offer and is concentrating on delivering its expansion plans, spokeswoman Christina Mills said by phone from London.
The bid would be "futile" should it erode the value of BHPB investors` shares, BlackRock Inc, the largest publicly traded US asset manager, said last week, adding that regulators would play a "big role" in the transaction.