BHP tight-lipped over formal offer

BHP Billiton has restated the
BHP tight-lipped over formal offer BHP tight-lipped over formal offer BHP tight-lipped over formal offer BHP tight-lipped over formal offer BHP tight-lipped over formal offer


Staff Reporter

Ealier this week, Rio asked the United Kingdom Takeovers Panel to set a deadline by which BHP must make a formal offer for Rio, under the UK's so-called "put up or shut up" clause.

The move could see BHP make a formal bid for Rio within eight weeks.

However, in a conference call yesterday BHP Billiton chief executive Marius Kloppers refused to disclose when BHP would make a decision in regards to a formal offer.

"We have had contact with the Takeovers Panel, they have asked us for a submission which we have not yet made," he said.

"We haven't taken any decision today beyond what is on the table. Whether we take that decision, and what form that decision will take, we'll take all the time that we have got to do so."

Kloppers also declined to discuss whether BHP would increase its three-for-one takeover proposal, valued at around $150 billion, to get Rio to the negotiating table.

"We would be absolutely delighted to talk to Rio management and board members, and in fact we don't see any downside for them to talk to us given the market has responded in the way that it has," he said.

Kloppers restated that the proposal would unlock substantial value which would be lost if a merger did not take place between the two miners.

"Since the time of our proposal a lot of commentators have commented on the value to be unlocked [from a merger]," he said.

"I think it is an indisputable fact that there is value to be unlocked here between this combination ... value that cannot be unlocked without a transaction.

"So it's a little mystifying to us that we are not able to talk about a transaction given that everybody knows that this value is here."

In an announcement to the market, BHP outlined its plans for its Olympic Dam operation and its Western Australian iron ore business, and said it offered a superior growth profile to Rio.

At Olympic Dam, BHP confirmed that its brownfield expansion plans would ramp-up production to 730,000 tonnes of copper per annum, 19,000tpa uranium and 800,000oz gold per annum.

BHP said Olympic Dam's prospective copper production was greater than the total production from Rio's growth projects including Peruvian and Mongolian greenfield development options.

Commenting on its infrastructure development plans for its iron ore business in WA, BHP said its Pilbara rail system could be developed to meet future growth plans and the company's plans to expand capacity at Port Hedland to 200 million tonnes per annum were well advanced.

BHP also said port capacity at Port Hedland could be ramped-up to 700Mtpa if the outer harbour was expanded to more than 400Mtpa.

The company has 17 major projects in development stages representing capital expenditure of US$12.3 billion, and 12 major projects in feasibility representing capital expenditure of $6.1 billion with future options valued at around $50 billion.

"Any argument that Rio Tinto was or is 'undervalued' relative to BHP Billiton cannot be sustained and is not supported by the relative performance of, and outlook for, the two companies," BHP said.

Rio refuses to negotiate with BHP over the three-for-one proposal, which it believes undervalues the company.

Shares in BHP closed yesterday at $43.20 while shares in Rio closed the day at $142, up $28.6 (25%) on its closing price of $113.40 on November 8, the day prior to BHP's proposal.