
All eyes are on BHP Billiton Limited (NYSE: BHP) and Rio Tinto plc
(NYSE: RTP) this week as a deadline for a mega-merger between the two
quickly approaches. The UK Takeover Panel required that BHP submit a
formal bid for Rio Tinto by February 6th or it will not be able to make
any future bids for at least six months. The current offer is a 3-for-1
share deal that Rio Tinto rejected as bid that grossly undervalued
their company. Many shareholders believe that the mega-merger may be
stalled as the deadline quickly approaches.
BHP is a $190 billion company with mining interests all over the
world. It specializes in petroleum, aluminum, base metals, stainless
steel, iron ore, manganese, coal, and diamond and specialty products.
Meanwhile, Rio Tinto is almost as large at $130 billion and it
specializes in aluminum, copper, diamonds, energy products, gold,
industrial minerals and iron ore. Combined, these two companies would
corner 38% of the iron ore market, 6% of the copper market, and become
the world’s largest coal supplier. As a result, many eyes are on this
potential merger.
Interestingly, there may be others that are also interested in Rio
Tinto. Alcoa and Aluminum Corporation of China announced the joint
acquisition of 12% of the company just recently. The two described the
acquisition as a “strategic stake” and reserved the right to make a bid
for the company if a third party made a firm offer. Presumably, if BHP
made an offer, then a bidding war may ensue for Rio Tinto, which is
great news for its shareholders but potentially bad news for many
others.
In the end, it will be interesting to see how this situation
unfolds. BHP has its own earnings to deal with this week, but the
February 6th deadline is quickly approaching and they may be forced to
act if they want to make a serious attempt to buy Rio Tinto. Combined,
these factors make this stock one that is definitely worth watching!
Related Companies
Alcoa Inc. (AA)
Anglo American (AAL)
Rio Tinto Limited (RTP)