Rio Tinto Subject of Hostile Takeover
Written by admin on February 15th, 2008 in Business, Commodities, Companies.
On the back of the Commodities outlook for 2008 article at the end of January Financial Market predicted “mergers in (base metal) industry related firms could be the trend of 2008 with rising costs, labour shortages and generation of cashflow fostering the perfect conditions for mergers.”
It seems this has been demonstrated two weeks into February with mining firm Rio Tinto being unveiled as a potential hostile takeover target for rival BHP Billiton.
With £3.8billion profit for 2007, a 1% growth on 2006 profits, Rio Tinto has certainly benefited from surging commodity prices, leaving it in a good potion to fend off the hostile bid.
With demand for raw metals such as copper and coal from nations such as China driving consolidation in the sector, Anglio-Australian giant Rio Tinto rejected a £78.8billion takeover offer from its rival.
With commodity prices remaining high and production reaching record levels Rio’s chairman Paul Skinner said BHP Billiton needed to raise its offer “considerably” before the firm would enter talks.
“For us to become persuaded by the arguments for the combination we would need to see an offer for our shareholders that offers higher value than we could achieve ourselves” - Paul Skinner
BHP Billion’s bid offered 3.4 shares for each Rio Tinto share, already an increase from the unofficial 3 to 1 offer in December 2007, however BHP Billiton has warned it will not sweeten its offer.
