BHP Billiton's Acquisition Woes

BHP Billiton (BHP) just got sideswiped by China and Alcoa (AA) in their hope to acquire Rio Tinto (RTP). BHP has a bid in to takeover RTP, a bid that the board of RTP has been fighting with everything they've got. Now, looks like the Chinese have gotten into the fray with a 12% share buy of RTP. China has been terrified of what a BHP - RTP combo would do to the price they could obtain much needed iron. So will BHP keep plugging awayd? A bidding war? If so, you should buy RTP and enjoy the show.

But, perhaps, BHP, as I expect, realizes that China has deeper pockets than they do, and looks elsewhere? Southern Copper (PCU) is a gem but can't be bought unless they want to take over Grupo de Mexico (GMBXF.PK) which I doubt Mexico would allow. BHP is off limits per Brazilian interests. Xstrata (XSRAF.PK) wants to be sold but I think BHP is going after that and I bet they are tired of bidding assets up. Which leaves Freeport-McMoran (FCX), the copper, molybdenum, and gold powerhouse, an easier company to takeover with likely less Chinese balk. Each of these commodities are on fire - copper up for the year, mly trading an unbelievable $33, gold in frenzy climbing mode. BHP could do a lot worse than buying FCX and I don't think there will be a lot standing in their way.

Disclosure: Author has a long position in FCX

Comments

[Stephen Ros...:]

Actually I hold FCX long not BHP

2008 Feb 04 01:12 PM

[johnmorrison9:]

I am long FCX and PCU, and I like them on thier own.
The Chinese may sell thier stake to BHP, but I am not sure bigger is always better, and what about Vale?

2008 Feb 05 09:58 AM