Canadian Mining Journal

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CANADIAN MINING PERSPECTIVES: BHP Billiton, Rio Tinto take opposite sides in merger debate

Just when I thought it might be safe to raise my head, I look around and see another mega-merger steamrolling towar...


Just when I thought it might be safe to raise my head, I look around and see another mega-merger steamrolling toward us. BHP BILLITON, the world’s biggest mining company, has made an offer for the third largest miner, RIO TINTO. The offer is three BHP Billiton shares for each share of Rio Tinto. The deal values Rio Tinto at US$149 billion, and would create a behemoth with a market capitalization of over US$350 billion.

Predictably, the Rio Tinto board has said, “No thanks, it’s not enough.”

What is it about being part of a huge enterprise that turns executives into piranhas? It seems all they want to do lately is gobble up the competition. In the past two years we have watched so many large deals – Xstrata/Falconbridge, CVRD/Inco, Barrick/Placer Dome, Rio Tinto/Alcan – and scores of small deals unfold.

There must be something in the air of the upper floors of skyscrapers that turns a person’s focus away from running a corporation toward the imperative of making it bigger and bigger.

I find it hard to imagine any other company jumping in to rescue Rio Tinto from the clutches of BHP Billiton. Who is large enough – Anglo American? CVRD? Who can raise hundreds of billions of dollars – Teck Cominco? In the end, I imagine BHP Billiton will get its way. The only question becomes how much will it ultimately pay for its rival?

If I’m right, we might as well start choosing names for the new company. There is the descriptive but unwieldy BHP Billiton Rio Tinto. Or the names might be combined as either Rio Billiton or BHP Tinto. Perhaps something entirely new – Humongous Mining, Global Goliath or World Leading Minerals – might be in order. We’ll have to wait and see.


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