AusRAIL, Market Sectors

Traders flutter on Rio and BHP amid early speculation

<p>Shares in BHP Billiton and Rio Tinto surged yesterday (Wednesday, May 9) amid a frenzy of speculation that the two companies could collectively form the world’s largest producer of coal, copper and iron ore.</p> <p>Rio Tinto shares went from a low of $87 on Tuesday, to a peak of $99.69 yesterday &#8211 temporarily increasing the company’s value by about $17bn. </p> <p>Rio shares had already peaked above $90 after a smaller market flutter on Tuesday stemming from comments by Citigroup that BHP could position itself for a hostile takeover.</p> <p>The unprecedented market activity prompted the Australian Stock Exchange to request a formal explanation of Rio.</p> <p>In a statement, Rio Tinto said it was &#8220not aware of any takeover approach from BHP Billiton Limited&#8221.</p> <p>BHP carbon steel materials group president Chris Lynch told an investor talk that it would be &#8220dangerous to assume that it couldn’t happen to you&#8221 when discussing the potential for a takeover.</p> <p>BHP chief executive Chip Goodyear said the company would not comment about a specific target but confirmed that the company had &#8220obviously looked at a lot of things&#8221.</p> <p>Such a move, estimated to cost between $120bn and $160bn, would dwarf the recent monster takeover bids, such as Toll Holdings’s successful $6.2bn Patrick Corp deal and APA’s failed $11.1bn offer for Qantas.</p> <p>It would also put the combined company in a position to rival Brazil’s CVRD for the title of the world’s largest iron ore producer.</p> <p>The combined company could move 375mtpa of iron ore through the ports of Dampier, Hedland and Cape Lambert by 2010, if their individual plans continue.</p> <p>That figure would eclipse CVRD’s present 300mtpa of output.</p> <p>However, Stephen Bartholomeusz today in the <em>Sydney Morning Herald</em> hosed down the speculation, noting the departure of Mr Goodyear before the end of the year.</p> <p>&#8220BHP is not likely to embark on any strategic activity of this magnitude in the absence of a chief executive who could see through both the acquisition and the inevitably protracted period of integration,&#8221 he wrote.</p> <p>Send your feedback to <a href="/informaoz/LLDCN/emailform.jsp?" class="blue" target="info"></a> <br /> </p>