An important week for the future BHP Billiton- Rio Tinto merger.
World credit markets are freezing over, increasing the chances that BHP will find it tough for the next month or so to raise the suggested $US70 billion it needs to offer some sort of cash carrot to Rio shareholders and repay the $US38 billion Alcan debt; and Rio shareholders will hear tonight for the first time from the company's management on why they think the suggested deal undervalues the company.
The credit market situation worsened over the weekend with news the European central Bank would start pumping an unspecified amount of liquidity into money markets from tonight until the end of next month, at least (see accompanying story).
Rio CEO, Tom Albanese hosts the investor briefing in London tonight, where he will put up his reasons for turning down BHP's three-for-one share offer.
London media reports yesterday claimed that Rio would launch a counter-attack against the BHP takeover suggestion by highlighting his company's record of identifying and exploiting mining assets, and will also criticise what it claims is BHP's poor track record and claims for synergies in combining the two companies.
Rio will claim BHP has radically underestimated the potential cost and revenue savings of combining the two groups and particularly their iron-ore assets in Australia.
BHP has estimated that the deal would create $US3.7 billion annual savings in around five years time, but Rio will claim the synergies will be far more and that for this reason, the three BHP share for every one Rio share offer undervalues the company.
The London reports said that while Rio will attack its rival, the briefing is not designed to be a full blown defence of the suggested offer.
BHP's chief executive, Marius Kloppers has been touring iron-ore customers in Asia over the past week and faced opposition in Japan, Korea and China, but apart from resistance from buyers that there was little they could do to stop the deal.
A combination of BHP and Rio would create a natural-resources giant with 36% of the global seaborne iron ore trade, second behind the share held by Brazil's CVRD. It would also be a big presence in copper, coal and aluminium.
The China Iron and Steel Association and its Japanese counterpart have both bagged the suggested deal, while the trade body, the International Iron and Steel Institute, says the deal is "against the public interest" and should be blocked.
The European Commission has already started looking at competition issues. The attitude of the new Rudd Government in Australia will also be awaited with interest.
Rio's recent acquisition of Alcan makes it the world's largest producer of aluminium and its fourth biggest producer of alumina.
BHP closed 17c softer on Friday at $40.27. Rio Tinto shares eased 37c to $128.40.
Meanwhile our favourite takeover situation, the Symbion-Healthscope-Primary health Care imbroglio, remains as confused as ever after the events of Friday.
Symbion and Healthscope asked for their shares to be suspended on Friday morning, pending an announcement.
Later in the day it was announced that Primary's subsidiary Idameneo had lost its court bid against Symbion Health and its board of directors over a proposed asset sale by Symbion to Healthscope.
That led investors to think that that was the reason for the suspension of trading. Symbion gloated late Friday and Primary glowered and said it was considering its position but the court decision wasn't what the suspension was about.
It seems that is to do with the tax position of the proposed sale by Symbion of its diagnostic and other heath care businesses to Healthscope. Symbion shareholders meet on that proposal this week and Primary, which has a 20% stake, says the vote shouldn't happen.
But Primary can't block this.
Primary used its 20% of Symbion to stop an earlier attempt by Healthscope to acquire Symbion. When Healthscope last month revived the deal, Primary took legal action to stop Symbion shareholders from approving the merger at a meeting to be held this Friday.
Healthscope's latest deal involves it buying Symbion's diagnostics assets in a scrip deal worth $1.6 billion. Private equity firms Ironbridge Capital and Archer Capital will buy the consumer and pharmacy services businesses for $1.15 billion cash. But that will need approval of SYB shareholders and Primary says it will vote that deal down.
Primary launched its own $2.65 billion takeover offer for Symbion earlier this month but that has been rejected. That offer is at $4.10 a share, but Primary can't really submit the deal until next month, when a six month period is up because it doesn't want to be forced to offer $4.17 a SYB share, the top price it paid when acquiring the 20% stake.
The federal court dismissal of Primary's application Friday and its assertion that Symbion directors had breached their duty by entering into a break fee agreement with Healthscope, was pretty comprehensive. The judge ruled the Primary action was "defective".
Primary was told to pay costs.
The Australian Tax Office is the biggest hurdle. Rollover relief normally is only granted when at least 80% of a business is acquired. The Healthscope tie-up with Symbion falls just under that limit.
Symbion CEO, Robert Cooke says that if the tax office concludes that a proposed scrip merger for just 75% of the business could not get capital tax rollover relief, the deal with Healthscope would be off.
Primary shares rose 3c to $12.28. Healthscope and Symbion shares were in a trading halt.
The Kerry Stokes controlled Nylex says its board will unanimously recommend shareholders accept the offer of $2.65 per share from buyout group, CHAMP that values the company at $150 million.
