BHP Billiton this morning made history by launching the world's largest ever takeover offer with a $US147.4 billion offer for rival, Rio Tnto.
BHP made a sweetened bid for Rio after the London-based rival refused to enter merger negotiations.
BHP offered 3.4 shares for each share of Rio, the Melbourne- based company said today in a statement to the ASX.
BHP's original three-for-one all-stock proposal made on November 8 was rejected by Rio as undervaluing its mines and growth prospects.
Bloomberg said Rio Tinto's American depositary receipts gained 6.3% to $450 in New York.
Yesterday local investors were split: Rio shares eased 76c to $127.35 and BHP shares rose 33c to $39.65. There seems to be a slight expectation the deal won't happen.
But you'd think that with the company reporting its 2007-08 interim earnings later today, it would also reveal the bid's future in Australian time.
It can either launch the three BHP shares for every Rio share offer, or it can walk away and wait another six months under London Takeover Panel rules.
The intervention by Chinalco and Alcoa of the US (along for the ride to make it look not like a Chinese only deal) has only made it certain that Rio's days are numbered.
The price they paid for 12% of the London listed shares of around $133 in fact confirms the terms of the BHP three for one suggestion, making it certain that if the bid proceeds, it will be on that basis, with possibly a cash sweetener.
In the meantime, the important news will be the earnings for the December half year.
Brokers' forecasts suggest the figure will be around $US6.3 billion, per haps as much as $US6.7 billion.
BHP last month reported record half-year output for iron ore, coking coal and petroleum and said demand would remain strong.
Among the highlights outlined by BHP in the half year production report were:
Record half year production from the total petroleum business, including record natural gas. Alumina, copper concentrate, iron ore, manganese ore and alloy also set records, as well as equal record production for aluminium. All supported by strong market conditions.
Significant increase in half year production of copper cathode, uranium, lead, zinc, diamonds and metallurgical coal.
Half year production records achieved at Worsley, Western Australia Iron Ore, GEMCO, Illawarra Coal, and Hunter Valley Coal (all Australia), Zamzama (Pakistan), Paranam (Suriname), Samarco (Brazil), Hillside and Samancor (both South Africa), and Cerrejon Coal (Colombia) operations. Mozal (Mozambique) equalled its previous record production.
Record half year shipments across the entire carbon steel materials commodity suite (iron ore up six percent, manganese up six percent and metallurgical coal up 13 percent) driven by continuing strong customer demand.
Record half year total material mined and ore hoisting achieved at Olympic Dam (Australia)."
The price of iron ore rose 9.5% for the year beginning April 1, 2007, led by demand from China.
Production of coking coal, also a key steelmaking ingredient, rose by 6% and this will help boost earnings in the company's carbon steel materials group which was the company's biggest earner in 2007.
Offsetting this will be lower prices for copper, nickel (the star in 2007), lead and zinc, but gold and oil and gas prices will be higher.
The company pointed out that earnings for the half would be impacted to the tune of $US466 million by problems at the Ravensthorpe nickel project in WA and at the Yabulu refinery in northern Queensland ($US132 million); the $US94 million cost for buying third party uranium to meet contracts, and $US240 million from timing differences on copper mined and prepared for shipment and provisionally priced, and final prices.
Aluminum Corp. of China (Chinalco) and Alcoa bought an effective 9% stake in Rio in their raid on the London-listed shares, which netted them a 12% holding in that stake for $US14 billion.
BHP shares have fallen by just over 7% in Australian trading since announcing its takeover proposal on November 8, while London-based Rio has risen 14%.
