At Last, Kloppers Has A Reason To Smile

The Age

Tuesday February 12, 2008

Barry FitzGerald

BHP Billiton managing director Marius Kloppers has a new spring in his step.

For the first time since the November disclosure that BHP had Rio Tinto in its sights, BHP's proposed scrip offer is finally in the ballpark, going by yesterday's closing prices for the pair.

BHP's improved scrip offer of 3.4-for-1 yesterday valued Rio at $121.89 a share. That was a small premium to Rio's $121.77 closing price. Although the premium was all of 12? a Rio share, it was the first time since BHP's initial scrip proposal of 3-for-1 was made public on November 8 that there has been any premium.

BHP's ability to get its head in front in what is set to be a long battle was despite Rio's advice to shareholders on the weekend that BHP's revised offer still did not fully reflect the group's value, indicating that to win an endorsement from the Rio board, BHP would need to again improve the $160 billion tilt.

Mr Kloppers is due to arrive in Japan on the first leg of a two-week international roadshow designed to placate customer concerns about the pricing and supply power of a BHP/Rio combination, as well as build pressure on the Rio board to negotiate - something Rio has so far refused to consider.

Rio gets to punch back at tomorrow's release of its 2007 profit report, forecast to weigh in at $US7.1 billion ($A7.9 billion), down from $US7.34 billion in 2006 because of the same cost pressures and exchange rate movements that halted BHP's five-year profit spurt in the December half.

Rio's profit will be released at 5pm Melbourne time. Managing director Tom Albanese will head the show from the group's London head office, with tough-talking chairman Paul Skinner. The Australian leg of the profit presentation - and continued BHP rejection - will be handled by finance director Guy Elliott, from the Melbourne office.

Analysts expect Rio will again focus on what it sees as its superior iron ore growth and the latent leverage in its aluminium business to forecast price improvement in the lightweight metal. Progress in the group's planned $US15 billion asset sales program to reduce debt is also expected.

Rio is bristling at Mr Kloppers' suggestion last week that Rio was struggling with the asset sales.

The reporter owns BHP shares.

LINK

? www.bhpbilliton.com

© 2008 The Age

Back to News Index | Back to Home