Rio Tinto Outlines Defense Against Billiton; Chinese Fund Denies Bid Plan

Includes: BHP, RIO
by: Judith Levy

Mining company Rio Tinto will raise dividends 30% and is considering the sale of up to $30 billion in assets as it struggles to fend off a $128 billion hostile bid from BHP Billiton. The company layed out its plans at an investor meeting Monday morning at the London Stock Exchange. "We believe we have a better growth pipeline than our competitors, which puts Rio Tinto in a strong position to supply the metal-hungry world," said Rio Tinto CEO Tom Albanese. "We have the people, execution capability and resources to work smarter, faster and better than our competitors." Rio emphasized its iron ore assets, which are valued at an estimated $100 billion following its acquisition of Alcan. Ahead of the meeting, Rio issued a statement outlining a plan to increase iron ore output to 600 million metric tons per year and committing $2.4 billion to develop two deposits in Western Australia. Rio's insistence that BHP's offer does not sufficiently value its assets has stimulated speculation that other suitors might emerge, possibly including China Investment Corp. [CIC], China's sovereign wealth fund. Chinese steelmakers have objected strongly to a Rio/BHP tie-up, which they argue would create a near monopoly in iron ore. China Business, a news weekly, reported that CIC is considering joining Chinese steel manufacturers in a $200 billion bid, but a CIC official said "there's absolutely no such thing" in the works. A joint bid "would require a lot of cooperation, and so far there's no news in this regard," said Luo Bingsheng, associate chairman of the China Iron and Steel Association. Rio also said it is not considering turning the tables and bidding for BHP in a so-called Pac-Man defense. "The first time I heard about Pac-Man was reading about it in the newspaper and it is not something I have given serious consideration," Albanese said. BHP shares closed up 4.6% in Australia; Rio shares jumped 7.5%.

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