14 November 2007
BHP Billiton: Merger would help meet Chinese demand

BRISBANE A merger between AngloAustralian rivals BHP Billiton Ltd. and Rio Tinto Ltd. would help the miners satisfy China's burgeoning demand for steel, a BHP Billiton executive said Tuesday.

Rio Tinto last week rejected BHP Billiton's 3-for-i share offer that Dealogic PLC calculated to be worth as much as US$149 billion.

BHP Billiton Chief Executive Marius Kloppers said the world's biggest miner had yet to discuss with China, its biggest customer, the benefits of the merger in the key Australian iron ore market.

"One of the major messages which we have not adequately discussed with all of the stakeholders, quite frankly, is the ability of the combination to accelerate more product more quickly and that is the fundamental benefit that we want to discuss with our Chinese customers," Kloppers told Australian Broadcasting Corp. radio in Australia in a telephone interview from London.

"I don't think everybody understands that we are talking about very substantial additional volumes, particularly on the steel making raw material side of the business," he added.

While some customers are concerned that their price bargaining power could be diminished by the merger, Hoopers said the Chinese were not hostile to the proposal.BHP Billiton said Monday the deal would bring US$3.7 billion in savings and earnings.

In its statement to the Australian Securities Exchange, it said the deal is the most logical and compelling consolidation opportunity for both companies.
Rio Tinto says the offer undervalues the company.BHP Billiton said its offer valued Rio Tinto at US$153 billion, representing a 25% premium, based on closing prices on Oct. 31.

The miner said bringing together the two resources giants would deliver unique opportunities for value creation, including more efficient development of their twin iron ore operations in the Pilbara region in Western Australia state and the streamlining of Australian coal operations, where output is currently crimped by infrastructure bottlenecks.

, BHP Billiton and Rio Tinto are both upgrading port and rail facilities at their Pilbara iron ore projects,and UBS analysts said bringing the companies together would deliver significant savings as it would stop duplication of capital expenditure at these operations.
Kloppers could not be immediately contacted for comment Tuesday.

Shares of BHP rose 10 cents, or 0.2%, to A$4i.8o in Sydney, while and Rio Tinto shares fell 72 cents, or 0.5%, to A$i39.oo. BHP bounced strongly from an eightweek low of A$4o.88. (AP)

Source : The Point

 

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