Focus Turns To Small Investors
Sydney Morning Herald
Wednesday April 30, 2008
BHP BILLITON has begun courting retail stockbrokers as it intensifies its campaign to win over Rio Tinto's shareholders with its $US147 billion ($157 billion) hostile offer.
BHP believes reaching out to smaller investors is particularly important since it is seeking to push its bid through without a board recommendation. Rio's shareholders proved a loyal bunch at the miner's annual meeting in Brisbane last week, with none questioning the board's refusal to negotiate with BHP. BHP's chief financial officer, Alex Vanselow, met brokers at Patersons Securities' Melbourne office yesterday morning, reiterating the company's view of the "stronger for longer" commodities cycle. Mr Vanselow and BHP's carbon steel materials head, Marcus Randolph, are expected to give the same presentation to other retail sales desks- first in Melbourne and later in Sydney. A Patersons note following the meeting said Mr Vanselow spoke "candidly" about the proposed Rio takeover. He told brokers the companies were a logical fit and were the two best global miners with the two best management teams. He added BHP saw "super-diversified" miners as the next step in the industry's evolution.The presentation slides seen by the Herald show BHP emphasised it had invested $US22.7 billion in growth projects since 2002, while Rio had invested $US7.2 billion. But BHP's figure included its $US7.3 billion takeover of WMC Resources in 2005 and billions spent on petroleum projects. It omitted Rio's $US38.1 billion acquisition of Alcan last year. BHP also noted it had a higher exposure to steel-making raw materials than Rio in absolute terms, with $US4.7 billion of earnings from iron ore, coking coal and manganese in 2007, compared with Rio's $US4.2 billion of earnings from iron ore and coking coal in the same period. Coking coal and manganese prices have risen by between 200 per cent and 400 per cent this year, compared with a 71 per cent increase in the iron ore price.BHP's 3.4-for-1 offer will not be considered by Rio shareholders until it receives approval from global competition regulators. BHP has not yet filed its first paperwork with European Union regulators and is not expected to release a bidder's statement until the end of the year.In recent weeks Rio's shares have traded below BHP's implied offer price, despite the target's efforts to close the gap through investor presentations and announcements about growth projects.Rio shares closed $2.30 lower at $141.20, while BHP shares closed 29c higher at $43.89, meaning a trading ratio of 3.22-for-1.
© 2008 Sydney Morning Herald
