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Rio Tinto shares tumble after BHP fails to make offer

Rio Tinto Group, defending a hostile US$108 billion takeover bid from rival mining company BHP Billiton Ltd, had its biggest fall in more than 10 years in Sydney trading after BHP failed to make a new offer.

Speculation on Friday indicated Melbourne-based BHP, the world's largest mining company, would offer 3.5 shares and A$16 cash for each share in London-based Rio at the weekend, sending Rio shares up 4.5 percent.

Rio closed down A$9.75, or 7.9 percent, to A$114.25 on the Australian Stock Exchange.

It was the biggest fall since Oct. 28, 1997, when it lost 11 percent during the Asian financial crisis.

BHP fell 4.3 percent and the benchmark index declined for an 11th day extending its longest sell-off in a quarter of a century.

"Today's fall in Rio is not unexpected considering the market is down and after the massive turnaround on Friday and no bid eventuating," Kylie Macdonald, an investment adviser with ABN Amro Morgans Ltd in Sydney, said by phone.

deadline

BHP may not make a new offer before the Feb. 6 deadline set by the UK's Takeover Panel, the London-based Times newspaper reported yesterday.

The BHP board has not met to discuss a new bid, the newspaper said, after its initial three-for-one all share offer in November was rejected.

Samantha Evans, a BHP spokeswoman in Melbourne, declined to comment. Rio spokeswoman Amanda Buckley also declined to comment.

BHP is in "advanced stages of preparations" to make a £65 billion (US$127.1 billion) takeover bid for Rio, the Sunday Telegraph reported yesterday.

Advisers to BHP in London and Melbourne spoke to the takeover panel and Australia's corporate regulator last week to discuss technical issues relating to Rio's tax structure and dual listing, the newspaper said.

premium

"I don't think the fall indicates the bid is off as there is still a 14 percent premium built in based on the current offer," Gavin Van Der Wath, an analyst at BBY Ltd in Sydney, said by phone.

"When BHP falls, so does Rio and the market is having a significant impact on both shares," he said.

Rio says the deal undervalues its mines and growth prospects and has refused to engage in talks.

BHP says that the merged company would control a third of the world's iron-ore market and more energy coal, copper and aluminum than any of its rivals.

Profits from its Western Australian iron-ore operations increased by 13 percent last year, BHP said on Jan. 19.

The company reports second-quarter production on Jan. 23.
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