While bringing a brilliant annual report, Rio Tinto, the mining giant, once again expressed its view on the merger and acquisition of the two companies - welcoming Chinalco (hereinafter referred to as "Chinalco") and rejecting BHP Billiton.
On February 19, Lu Jiucheng, president of Rio Tinto Asia and China, told reporters at the Rio Tinto Annual Report conference that "Rio Tinto and Chinalco can find more areas of cooperation, but they have not yet started negotiations on this."
Previously, the cooperation between Rio Tinto and Chinalco in the field of alumina has been {Today Hot} for a long time, and Chinalco has invested in a bauxite mine next to Rio Tinto Australia.
At present, BHP Billiton has not officially responded to Rio Tinto's statement.
Effect of Chinalco's investment in Rio Tinto
Lu Jiucheng said frankly that Chinalco's entry has increased confidence for Rio Tinto's board of directors to reject BHP Billiton's takeover offer.
In fact, Chinalco's entry timing can be described as painstaking. After BHP Billiton made a takeover offer to Rio Tinto in November last year, Chinalco began to acquire the shares of Rio Tinto's listed companies in the United Kingdom through Singapore's wholly-owned subsidiary SPPL in conjunction with Alcoa. As of February 1 (five days before the British Merger and Acquisition Commission asked BHP Billiton to clarify whether to issue a takeover offer), its shareholding had reached 12%, and the total transaction consideration was about 14.05 billion dollars.
Lu Jiucheng told reporters that Rio Tinto was "flattered" when it learned that Chinalco had bought the company's shares. On the other hand, Chinalco's intervention has also directly brought pressure on BHP Billiton to raise its purchase price - in the end, BHP Billiton's purchase offer changed from 3 shares for 1 share to 3.4 shares for 1 share.
However, after BHP Billiton proposed the above proposal, the Rio Tinto Board of Directors immediately rejected the proposal. Lu Jiucheng said frankly that compared with the purchase price of Chinalco, the bid of BHP Billiton greatly underestimated the potential and value of Rio Tinto.
It is worth noting that Rio Tinto's Board of Directors does not include its shareholders. Although BHP Billiton and Rio Tinto's shareholders mostly overlap, BHP Billiton is still difficult to directly pressure Rio Tinto's Board of Directors, and can only lobby indirectly through its shareholders. As long as Rio Tinto's Board of Directors can create better value for shareholders through the company's development, the attractiveness of BHP Billiton's acquisition proposal is questionable.
Lu Jiucheng said, "BHP Billiton has not had sufficient reason to make our board of directors have a dialogue with them, so we have not discussed the next step."
Rio Tinto's attitude towards Chinalco is understandable. At present, the output of aluminum oxide of Chinalco is the second in the world, the output of electrolytic aluminum is the third in the world, and the output of aluminum processing materials is the fifth in the world. Chinalco has a strong international influence in the world aluminum industry, and its current market value exceeds 50 billion dollars. In 2007, the operating revenue of Chinalco exceeded 130 billion yuan, the company's asset scale has exceeded 200 billion yuan, and the profit has exceeded 20 billion yuan for two consecutive years. Lv Youqing, the deputy general manager of Chinalco, once said that the company's important strategic investment in Rio Tinto is based on the company's development strategy. The company is optimistic about the mining prospect, as well as the value of Li {HotTag} and its management's ability to realize shareholder value.
The deeper reason for Chinalco's move is that my Iron and Steel Research Center once pointed out in its report that if BHP Billiton's acquisition of Rio Tinto is successful, the strength of the new company will be greatly increased. In order to control aluminum resources and market, BHP Billiton may purchase Alcoa or Chinalco, and BHP Billiton's acquisition of Rio Tinto poses a serious threat to Alcoa.
Unclear bidding prospect
According to Rio Tinto's latest annual report, Rio Tinto currently has three major sectors - primary aluminum, iron ore and copper. After the acquisition of Alcan, Rio Tinto has become the world's largest aluminum group. There is no accurate statistical data on the synergistic effect between Chinalco and Rio Tinto. But it is certain that Chinalco may continue to increase its stake in Rio Tinto.
It is reported that the Foreign Investment Review Board of Australia is reviewing the equity acquisition. Although the proportion of shares purchased by Chinalco and Alcoa in Rio Tinto is lower than the 15% upper limit for automatically triggering the government investigation, the insiders told reporters, It may be that Chinalco volunteered to accept the review, which means that Chinalco may indeed increase its stake in Rio Tinto to more than 15% in the future.
At present, BHP Billiton still needs to make efforts to pass the antitrust review of relevant countries after issuing a clear proposal for acquisition by offer, and this process will take several months. After this process is completed, Rio Tinto shareholders can vote on whether they accept BHP Billiton's proposal. BHP Billiton shares 60% - 70% of Rio Tinto's shareholders. BHP Billiton's goal is to win the support of 50.1% or more of Rio Tinto's shareholders. In the process of BHP Billiton's efforts, Chinalco still has much room for action.
For Rio Tinto's industrial development, compared with Chinalco, BHP Billiton's greater advantage is that it has some resources and facilities that make it covet. The restriction of Rio Tinto's supply of mineral products lies in that although its wharf expansion in Western Australia is relatively smooth, in eastern Australia, the flow of technicians, mining machinery and equipment, and Rio Tinto's transportation capacity in wharf and railway are restricted. It is precisely because of the weather and transportation capacity problems that the growth rate of Rio Tinto steam coal and coking coal was negative last year. Han Xu, chief economist of Rio Tinto, said that it is difficult for Rio Tinto to improve this situation quickly, and BHP Billiton has strengths here.
However, Rio Tinto's attitude is still "independent", saying that the company's own development opportunities and potential are very large. The company's representatives are striving for the conditions in the iron ore negotiation in Japan, and will not give up their efforts to increase the iron ore shipping fees in fiscal year 2008. Han Xu believes that while the entire western economy is affected by subprime debt, the economic growth of China and India still maintains a very strong speed. China's demand for mineral products can last for decades, and cooperation with Chinalco may lead China's demand for mineral products.
In 2007, Rio Tinto's pin Sales accounted for more than 18% of the group's total sales, mainly from iron ore, while BHP Billiton's figure was 20%.