BHP May Go Direct To Rio Tinto Shareholders

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The Independent Online

Marius Kloppers, chief executive of mining giant BHP Billiton, has pledged to continue to pressure the management team at Rio Tinto to enter talks regarding a takeover of the company and has raised the prospect of taking the offer directly to the target company's shareholders.

Speaking in Johannesburg over the weekend, Mr Kloppers called on Tom Albanese, his opposite number at Rio Tinto, to enter talks regarding the creation of a mining "super-major" and said that he has urged shareholders in Rio to pressure its management team to begin discussions over a tie-up.

"We are talking directly to shareholders; we ask shareholders to ask management to engage to deliver this," Mr Kloppers said. He said that the company would continue to push the Rio Tinto management team to enter discussions but was open to the possibility of taking a bid directly to the company's shareholders. "We are hopeful that management will engage with us, but certainly that is one of the options that should be considered down the track, but that is simply not a decision that we've got to take today," he said.

BHP has yet to make a formal bid for its rival but its proposed $140bn all-share offer has been dismissed by Rio Tinto's management as " significantly" undervaluing the company. Rio Tinto has garnered support from some key shareholders who believe that BHP will need to sweeten its initial offer and include a large cash element to tempt investors into accepting the deal. BHP's management has been talking with investors in Europe, Australia and South Africa over the past week about the merits of the takeover – up to 70 per cent of BHP's investors also have holdings in Rio Tinto.

Speaking in South Africa, Mr Kloppers suggested that investors had been receptive to the merits of the takeover which would yield significant synergies and create a global mining powerhouse with strong positions in the iron ore, copper and coal markets. Mr Kloppers will head over to Asia this week to discuss the benefits of the deal with some of the company's largest customers in Japan, South Korea and China whilst Alex Vanselow, BHP's chief financial officer, travelling to North America to present to US investors.

.Rio Tinto is holding an investor day on November 26 and is set to present a strong case for the company's ability to create value as a standalone business. Reports that the company is considering a counter-offer for BHP appear wide of the mark however the company is likely to discuss asset disposal plans in the wake of its own acquisition of Canada's aluminium giant Alcan. Rio Tinto called the investor meeting long before the BHP offer was made earlier this month.