On November 8, 2008, as BHP Billiton, the Australian mining
giant, announced an all-stock takeover bid worth $140 bn
for the Anglo-Australian mining group, Rio Tinto, which
stirred up a hornet's nest not only with its biggest rival
but it even elicited strong voices of protest from steelmakers
globally. Unperturbed, BHP's top brass believes that a merger
between the two of the world's top miners would create a
giant worth about $350 bn. As per the bid plan, one Rio
Tinto share would be swapped for three shares in BHP. According
to analysts' estimates, BHP-Rio combine may enjoy about
a little over a quarter of the global market share for iron
ore and control much of the global flow of aluminum, coal,
copper, uranium and diamonds.
However, the Australian mining
giant's grand plan to create a super mining house could
remain a distant dream, going by the strong reactions from
Rio's top management."There just wasn't enough value,
so it is dead in the water", said Tom Albanese, Rio
Tinto's CEO, in an interview, hinting that the British miner
is looking to stick with its independent growth strategy
after its $38.1 bn acquisition of Canada's Alcan, a month
ago in October this year.
With Alcan in its kitty, Rio Tinto
has already emerged as the world's largest producer of aluminum
and bauxite. Rio's strategy is simple: Consolidate its already
vast empire, which includes Rio Tinto Alcan aluminum division,
its iron ore business, including the Simandou project in
Guinea, West Africa, and its high-profile iron ore business
in western Australia. While Rio has not given any hint of
outrightly rejecting any similar takeover bids in future,
it has been quick to point that the market, especially BHP
has undervalued it. "The boards of Rio Tinto have given
the proposal careful consideration and concluded that it
significantly undervalues Rio Tinto and its prospects",
the company said in a statement. BHP has retorted by saying
that it "intends to continue to seek an opportunity
to meet and discuss its proposal with Rio Tinto."
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