Sydney: Anglo-Australian mining giant Rio Tinto Plc., on Thursday reiterated its opposition to a takeover proposal from BHP Billiton Ltd in a letter to shareholders outlining latest developments in the bid.
Rio Tinto chairman Paul Skinner repeated his board’s belief that BHP Billiton’s three-for-one share offer “significantly undervalued Rio Tinto and its prospects.”
Skinner pointed to Rio Tinto’s growth prospects in iron ore and copper, as well as its position as a global leader in aluminium.
On 19 December, Rio Tinto, which is the world’s second largest iron-ore exporter, said it will be “more aggressive” in annual supply talks with steelmakers and prices next year will be higher than expected, Lehman Brothers Holdings Inc. said.
Securing contract prices that beat 2008 estimates will increase Rio’s value and increase the price potential suitor BHP Billiton must pay to acquire the company.
“Together these are positioned to capture strong growth in demand in the developing economies, including China and India,” Skinner said in the letter released to the Australian Stock Exchange.
Skinner said he was “pleased” to inform shareholders that the British Takeover Panel had ruled BHP Billiton must either announce a firm intention to make an offer for Rio Tinto by 6 February.
The ruling, given on Friday, came after Rio Tinto successfully invoked Britain’s so-called “put up or shut up” laws, which allow a company to put a time limit on potential buyers to clarify their position during a takeover bid.
BHP Billiton responded to the deadline on 23 December, saying it was still seeking talks with Rio Tinto and had not yet decided on whether to proceed with a formal bid.
A merger between BHP Billiton and Rio Tinto, the world’s largest and third largest miners, respectively, would create the planet’s largest producer of coking coal, thermal coal, copper and aluminium.
Customers in China, have expressed disquiet at the prospect of the mega-merger, fearing it would give BHP too much power to set prices.
In Hong Kong, the South China Morning Post, citing unnamed sources, reported last Monday that China had sanctioned state-owned companies to examine possible strategies to block the proposed deal.
Rio Tinto shares were up $3.27 (Rs112.4) or 2.4% at 135.71 and BHP Billiton shares rose 64 cents or 1.6% to $41.16 in late afternoon trading on a rising Australian market.
Bloomberg contributed to this story.