BHP Billiton Ltd chief executive Marius Kloppers said he was confident the company’s $170 billion takeover of Rio Tinto will be successful, as he would.
The huge $200 billion bid for Rio was formally started last week when the first paperwork was filed with the European Commission, the European Union’s antitrust regulator. Regulators in countries like Australia and the US will have to assess it, so the bid may or may not have life after July 4.
Now senior BHP executives have been out this week selling the bid overseas and yesterday in Australia with CEO Kloppers speaking to the Melbourne Mining Club .
"If our takeover of Rio Tinto is successful, and I believe it will be, the combination will create even greater value for shareholders," Mr Kloppers told the Melbourne Mining Club.
The European Commission has between 25 and 35 working days to approve the deal after receiving the paperwork, with possible conditions, or begin a five-month period considering the takeover in more detail.
The company must also submit documents with regulators in Australia, South Africa and the United States.
The BHP CEO made it clear in reported comments that he sees no need to make any concessions to the Europeans, an approach that might come back to bite him hard as the European Commission is emerging as the most activist competition regulator in the world.
Mr Kloppers’ line was bullish as he reiterated that demand for commodities is expected to continue, primarily driven by China’s urbanisation, with BHP Billiton’s asset and expansion pipeline pointing to future growth of about 7% per annum for the company over the next five years.
"This growth excludes any projects that will not deliver within that time frame, and includes only relevant volumes from projects that will be only partially ramped up at the end of this period.
“We have used this period because, frankly, it’s very hard for anyone to predict which project will come in, when, beyond this.
"As we have said and continue to repeat, this growth is particularly valuable because it’s focused on high margin commodities such as petroleum and iron ore, and much of the growth will come from lower risk brownfield developments."
"If our takeover of Rio Tinto is successful – and I believe it will be – the combination will create even greater value for shareholders.
"Our relentless focus on our core strategy overlayed with a management philosophy of simplicity and accountability, along with a global talent pool, positions us well to take that combined entity to greater successes than either company could build on their own.
"It also delivers shareholders the exciting opportunity to participate in the world’s largest mining company, and one of the world’s greatest companies.
"But, with or without Rio Tinto, BHP Billiton will continue to deliver exceptional performance."
The message was clear: BHP Billiton expects more reliable and profitable production growth over the next five years than Rio Tinto.
It’s a takeover line, but one which tries to meet head on the defence from Rio management that it is better placed than BHP with a more broad suite of projects to develop.
Rio has been flooding the email boxes of media and analysts this week with a series of emails revealing higher reserves (mostly ‘inferred’) for projects in copper in North and South America and iron ore in Africa.
Earlier this week Rio said it was ‘exceptionally well placed’ to ride the resources boom.
Rio Tinto told investors this week that it is exceptionally well-placed to take advantage of an expected doubling of world demand for its metals and minerals by 2022.
Chief executive Tom Albanese and his senior management team provided detail on resource upgrades, as well as new information on the Group’s project pipeline at a ‘value and growth’ seminar in London.
"Chief financial officer Guy Elliott will set out the internal valuation methods that Rio Tinto employs for its future growth options.
"Rio Tinto has also announced significant new resources, across different ore bodies, which will underpin the Group’s superior trajectory for long term growth,”Rio said.
Two days later it was Mr Kloppers on the ‘hard sell’.
BHP’s target of 6.9% annual production growth is lower than Rio Tinto’s forecast for 8.6% until 2015, but Mr Kloppers said his company’s growth would come from some of its highest margin businesses and projects with lower risk because they involve expansions of existing mines.
”Much of our growth is focused on the highest margin businesses in which we have a clear advantage,” Kloppers said.
He said petroleum was BHP’s most profitable business in 2007, with a margin of 75%. Iron ore had a profit margin of 52%.
BHP has offered 3.4 of its shares for Rio. BHP shares fell $1.94 yesterday on the back of easing oil and copper prices to $42.50. Rio shares shed $5.30 to $134.95. The BHP offer was worth $144.50, so the market remains sceptical that the deal will happen.
While Rio Tinto talked about its growth forecast to 2015, BHP focused on the period to 2012 because it said anything beyond that was too hard to predict.
Interestingly Mr Kloppers also said the company was planning "several phases" of expansion to its Olympic Dam in South Australia to increase copper output to 730,000 tonnes per annum and uranium production to 19,000 tonnes per year.
"Olympic Dam, after a drilling campaign over the last three years, is now the fou
