WINDOW OPENS FOR BHP TO RENEW BID FOR RIO TINTO

MELBOURNE, Nov 09, 2009 (AsiaPulse via COMTEX) -- RTOLY | Quote | Chart | News | PowerRating -- Resources giant BHP Billiton Ltd (ASX:BHP) has a new window of opportunity to make a fresh bid for rival Rio Tinto Ltd (ASX:RIO), after it abandoned a takeover move last year.

BHP Billiton will again be able to consider a potential bid Rio Tinto from November 27, when a mandatory one-year waiting period under UK corporations law expires, and resources analysts are speculating on whether such a move could go ahead.

In February 2008, BHP Billiton sought to takeover Rio Tinto in a deal originally valued at US$147.4 billion.

The hostile bid eventually failed in November, after share prices plunged following a fall in commodity prices, causing the takeover to be valued at about US$66 billion.

There was speculation BHP Billiton pulled the pin on the hostile bid because it was being made at the height of the financial crisis, and it would inherit Rio Tinto's debt which was then about US$40 billion.

Asset sales needed to reduce debt were seen as difficult at the time and there was also concerns about the hurdles needed to be cleared to appease regulators.

"They (BHP Billiton) have had 12 months to look around and they haven't done another deal, they haven't spent their money," said Bell Potter Securities client adviser Chris Kimber.

"The market has rallied 60 per cent, so either they are really dumb, and missed out on lots of bargains, or they have just decided that this is the only one that they want.

"I think the reason BHP Billiton has done nothing is because they have found nothing that suits them as much as Rio does."

Mr Kimber said he thought BHP Billiton would be most likely to strike in the period between November 27 and December 5 if any bid went ahead.

The December 5 date is key because that is the day BHP Billiton and Rio Tinto have targeted to reach a binding agreement on a US$116 billion tie up of their West Australian iron ore assets.

"My guess would be that they would want to bid straight away and put off signing the joint venture," Mr Kimber said.

A spokeswoman for BHP Billiton said the company had a policy of not commenting on speculation regarding takeover moves.

But in a note to clients last week, Citigroup said a bid for Rio Tinto would still make the most sense for BHP Billiton because of potential synergies and growth options that could be extracted from a combination of their global assets.

If BHP Billiton and Rio Tinto did merge the resulting company would easily be the world's biggest resources business, and leapfrog Brazilian miner Vale as the biggest iron ore producer globally.

However, Citigroup said it expected BHP Billiton would wait for greater clarity on its iron ore joint venture with Rio Tinto before making any move.

"If a binding agreement cannot be reached, a renewed tilt at Rio could certainly be on the cards," Citigroup said.

It said if a bid did proceed now, it would could be in the form of 2.3-for-one share swap.

This is far below the previous bid of 3.4 of its shares for every one Rio Tinto share, which equates to a 2.68-for-one bid after adjusting for Rio's mid-year rights issue.

But such a price would still offer a 30 per cent upside to Rio Tinto shareholders.

Before any takeover before BHP Billiton and Rio Tinto went ahead global regulators would need to sign-off, and shareholders would also need to approve the deal.

In 2008, the bid had passed Australian and US competition regulators, but there was uncertainty over whether the European Union was seeking to counter concentration of the companies' iron ore market share.

Shares in BHP Billiton finished up 21 cents at A$37.61 (US$34.73), while Rio Tinto shares were up 75 cents at A$65.75.

(AAP) rw

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