BHP Billiton Ltd, the world's largest mining company, may need to offer a 60 percent premium to buy Rio Tinto Group, Perennial Investment Partners Ltd said.
"Perhaps that's the price to get a friendly merger," Ken West at Melbourne-based Perennial Investment, which manages A$20 billion (US$18 billion), including Rio shares, said in an interview shown on ABC yesterday.
Rio paid a similar premium to buy Alcan Inc for US$38.1 billion, he said.
Rio won't consider any bid below ?70 (US$146) a share, the Times of London said yesterday, citing unidentified people close to the third-largest mining company. That was a 61 percent premium to the stock's price before Melbourne-based BHP said on Tuesday Rio had rejected an indicative three-for-one share offer.
The proposed takeover, which could be the world's largest, underscored BHP chief executive Marius Kloppers's prediction that a five-year rally in commodities would be sustained. BHP may need to add cash to its offer, investors said.
Rio rose to a record in London and Sydney trading on Friday, valuing the company at US$172 billion. Rio's closing price of 5,624 pence in London was 15 percent more than BHP's proposed offer. BHP fell 1.7 percent in London.
BHP spokeswoman Samantha Evans declined to comment yesterday. Ian Head, a spokesman for London-based Rio Tinto, also declined to comment.
BHP will pursue talks with Rio, the company said in a statement on Thursday. The bid "significantly undervalues Rio Tinto and its prospects," Rio said in a separate statement the same day.
BHP is arranging a US$70 billion loan through Citigroup Inc and could use US$30 billion as a cash sweetener for Rio investors, the Times said, without citing a source.
"They'll have to give a cash alternative," said Ray Chantry, an analyst at E.L.&C. Baillieu Stockbroking, in the same ABC interview. "Fund managers certainly want a scrip alternative, but some will want cash."
The merged company's assets would include a stake in Chile's Escondida, the world's largest copper mine, and operations in uranium, aluminum, diamonds, lead and nickel. It could generate between US$3 billion to US$5 billion in pretax cost savings and a friendly bid would create the most value, UBS AG said last week.
Combining BHP and Rio, which just bought aluminum producer Alcan, would create a company with estimated net income of as much as US$26 billion, said Tony Robson, co-head of mining research at BMO Capital Markets.
It would have a market value of US$379 billion at Friday's closing prices in Sydney and London and would have more than a third of the iron-ore market, the most energy coal and copper reserves, and operations in six continents.
"This is unquestionably about buying existing assets and leveraging off China and India for the next 15 years," Chantry said. "There's a strong project pipeline within Rio Tinto."
RETHINK? The defense ministry and Navy Command Headquarters could take over the indigenous submarine project and change its production timeline, a source said Admiral Huang Shu-kuang’s (黃曙光) resignation as head of the Indigenous Submarine Program and as a member of the National Security Council could affect the production of submarines, a source said yesterday. Huang in a statement last night said he had decided to resign due to national security concerns while expressing the hope that it would put a stop to political wrangling that only undermines the advancement of the nation’s defense capabilities. Taiwan People’s Party Legislator Vivian Huang (黃珊珊) yesterday said that the admiral, her older brother, felt it was time for him to step down and that he had completed what he
ROLLER-COASTER RIDE: More than five earthquakes ranging from magnitude 4.4 to 5.5 on the Richter scale shook eastern Taiwan in rapid succession yesterday afternoon Back-to-back weather fronts are forecast to hit Taiwan this week, resulting in rain across the nation in the coming days, the Central Weather Administration said yesterday, as it also warned residents in mountainous regions to be wary of landslides and rockfalls. As the first front approached, sporadic rainfall began in central and northern parts of Taiwan yesterday, the agency said, adding that rain is forecast to intensify in those regions today, while brief showers would also affect other parts of the nation. A second weather system is forecast to arrive on Thursday, bringing additional rain to the whole nation until Sunday, it
CONDITIONAL: The PRC imposes secret requirements that the funding it provides cannot be spent in states with diplomatic relations with Taiwan, Emma Reilly said China has been bribing UN officials to obtain “special benefits” and to block funding from countries that have diplomatic ties with Taiwan, a former UN employee told the British House of Commons on Tuesday. At a House of Commons Foreign Affairs Committee hearing into “international relations within the multilateral system,” former Office of the UN High Commissioner for Human Rights (OHCHR) employee Emma Reilly said in a written statement that “Beijing paid bribes to the two successive Presidents of the [UN] General Assembly” during the two-year negotiation of the Sustainable Development Goals. Another way China exercises influence within the UN Secretariat is
CHINA REACTS: The patrol and reconnaissance plane ‘transited the Taiwan Strait in international airspace,’ the 7th Fleet said, while Taipei said it saw nothing unusual The US 7th Fleet yesterday said that a US Navy P-8A Poseidon flew through the Taiwan Strait, a day after US and Chinese defense heads held their first talks since November 2022 in an effort to reduce regional tensions. The patrol and reconnaissance plane “transited the Taiwan Strait in international airspace,” the 7th Fleet said in a news release. “By operating within the Taiwan Strait in accordance with international law, the United States upholds the navigational rights and freedoms of all nations.” In a separate statement, the Ministry of National Defense said that it monitored nearby waters and airspace as the aircraft