BHP Raises Rio Offer After Chinalco Buys Stake

BHP Raises Rio Offer After Chinalco Buys Stake

Feb. 6 (Bloomberg) -- BHP Billiton Ltd., the world's biggest mining company, made a sweetened $147.4 billion takeover bid for Rio Tinto Group after its London-based competitor refused to enter merger negotiations.

BHP offered 3.4 shares for every one of Rio's, the Melbourne- based company said today in a statement to the Australian Stock Exchange. That compares with its Nov. 8 three-for-one offer rejected by Rio and is a 5.9 percent premium to yesterday's closing price in Australia.

``There will be people in the market who will think that this is not a final bid,'' said Steven Robinson, senior investment manager with Alleron Investment Management in Sydney, which manages A$1.1 billion. ``They've been chest beating about it so much they had to make some sort of bid.''

Chief Executive Officer Marius Kloppers raised his offer after Aluminum Corp. of China's surprise market raid last week threatened his plan to create a company to control a third of the world's iron-ore market and more energy coal, copper and aluminum than any of its rivals.

Rio Tinto's American depositary receipts gained 6.3 percent to $450 in New York.

Rio said the earlier offer undervalued its mines and growth prospects. Rio will study the terms of the new bid, the company said in statement today.

Kloppers has pledged to generate $3.7 billion in cost savings and revenue gains by buying the world's third-largest mining company.

New Output

``The synergy from the cost and revenue side would be enormous,'' said Simon Bonouvrie at Platypus Asset Management, which manages A$1.4 billion ($1.2 billion) including both stocks, in Sydney, before the announcement. ``It would bring new production quicker and benefit both sets of shareholders.''

Rio's shares have been trading at a premium to the November offer price, indicating some investors expected an increase. They surged Feb. 1 when Aluminum Corp., or Chinalco, as the state-owned company is known, and Alcoa Inc. said they'd taken a stake in Rio.

BHP must raise its offer to at least match the price the two rivals paid for their stake, investors including Herschel Asset Management Ltd. said this week.

Chinalco and Alcoa last week paid 6,000 pence ($117.85) a share for a 9 percent stake in London-based Rio Tinto. That was 23 percent more than the value of BHP's three-for-one share offer, based on Feb. 1's closing prices.


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