BHP Billiton's Acquisition Woes

by: Stephen Rosenman

BHP Billiton (NYSE:BHP) just got sideswiped by China and Alcoa (NYSE: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 (OTCPK:GMBXF) which I doubt Mexico would allow. BHP is off limits per Brazilian interests. Xstrata (OTC:XSRAF) 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 (NYSE: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

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