BHP Launches Sweetened Offer for Rio Tinto

BHP Billiton today launched a hostile offer for its rival Rio Tinto. The $147 billion (£74.8 billion) takeover bid offers 3.4 BHP shares for every share of Rio Tinto. This is an increase from the previous offer made in November, in which BHP offered three BHP shares for every Rio share. Rio rejected that deal, saying it grossly undervalued its worth. 

Rio Tinto Chairman Paul Skinner responded in a public statement, “The boards of Rio Tinto will consider the terms of the proposal carefully in the light of all circumstances and will make a further statement once they have completed this assessment. In the meantime, the boards encourage shareholders not to take any action.”

Some analysts are saying that this offer may bring Rio to the table, but others doubt that the sweetened bid would be enough to win the rival miner. According to BHP CEO Marius Kloppers, “This is our first and only offer.”

The combined company would control over a third of the world’s iron ore, as well as copper, aluminum and coal. However, there are factors that may confound BHP’s move. 

Last week, U.S. aluminum mining giant Alcoa Inc and Aluminum Corp or China (Chinalco), a state-owned mining company, jointly acquired a 12 percent stake in Rio Tinto. The estimated $14.05 billion deal was the largest overseas investment ever by a Chinese company.

Although Alcoa and Chinalco stated that they did not “currently intend to make an offer for Rio,” they stressed that they reserved the right to make an offer or participate in an offer within the next six months, should a third party launch a formal bid for the mining firm.