Rio Tinto rejects BHP Billiton’s bid for stake

BHP Billiton has made a long-awaited bid approach to Rio Tinto, in a move aimed at creating a $350 billion-plus mining...

BHP Billiton has made a long-awaited bid approach to Rio Tinto, in a move aimed at creating a $350 billion-plus mining giant, but Rio rejected the all-share proposal as too low. Rio shares leapt as much as 30 per cent in London to a record high, after it said BHP had proposed offering three of its shares for every one Rio share — worth about $140 billion at current prices.

That would make it the world’s second-biggest takeover deal after mobile phone giant Vodafone’s purchase of Mannesmann in 2000 and would create a $360 billion company — roughly the same size as US computing giant Microsoft.

“The boards of Rio Tinto have given the proposal careful consideration and concluded that it significantly undervalues Rio Tinto and its prospects,” Rio, the world’s third-biggest miner, said in a statement. The three-for-one offer would give investors a premium of 14.4 per cent based on closing prices of the shares in Australia before BHP announced its offer, but this flipped into a discount of 6 per cent after Rio’s shares soared in London, implying investors expect a sweetener from BHP.

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BHP, already the world’s biggest miner, was undeterred at Rio’s rejection. “BHP … intends to continue to seek an opportunity to meet and discuss its proposal with Rio Tinto,” it said in a statement. Rio Tinto spokesman Nick Cobban declined to say whether the firm would agree to talks with BHP about a possible link-up. “The board has given its response to BHP on the proposal that it put forward and there it ends, as far as we’re concerned at this stage,” he said when asked about BHP’s request.

Rio shares in London were had gained 26 percent to 5,480 pence after hitting a record 5,638 pence. BHP was down 2.2 percent at 1,717 pence.

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