Rio Tinto brandished a record annual profit yesterday to bolster its case against a $147bn (£74bn) hostile takeover offer from BHP Billiton.
The Australian mining giant reported underlying earnings of $7.4bn, a 1 per cent increase over the previous year. Its chief executive Tom Albanese said that the numbers, helped greatly by a one-off $392m bump related to a change in Canadian tax law, were evidence that BHP's record takeover bid was "still a long way away," from offering full value for the business.
Coming just a week after BHP sweetened its offer to 3.4 shares for each Rio share, the market greeted the numbers with a yawn. Rio's shares ended the day down 23p at 5,500p. Three months into the takeover battle, the market is showing itself less prone to influence by the declarations of either company. BHP estimates that it will take nearly a year for its offer to wend its way through the regulatory and antitrust approvals and reach Rio shareholders for a vote.
"We are rapidly approaching the territory where the ability of either of them to say anything that moves the relative [share] exchange ratio is quite limited," said Simon Toyne, an analyst at Numis Securities. Shares settled yesterday at a ratio of around 3.55 BHP shares to each Rio share, where they have spent much of the last week since Rio rejected BHP's sweetened bid. The chairman Paul Skinner said Rio would continue about its business and implied that the BHP bid, estimated to need the blessing of 100 bodies in jurisdictions around the world, may prove crippling.
"Transactions with complex regulatory dimensions do have the potential to destroy value," he said. Rio confirmed that it had met just once with Chinalco, the Chinese aluminium giant that recently bought 9 per cent of its shares in a surprise raid. They have not spoken since BHP increased its offer last week. The Chinese company reiterated its stance that the Rio stake was a strategic investment and that it had no desire for board representation, Mr Skinner said. Talks of teaming up on future projects were "still in the foothills," he added.
One point that analysts did focus on was the commodity production growth projections from Rio that forecast a compound annual growth rate of 8.6 per cent through 2015, more than twice the 3.9 per cent that it estimates BHP will generate. One analyst expressed scepticism at the numbers. "I am sure that they included every project they could possibly imagine that could come on stream to get to that figure. BHP would surely take a dramatically different view," he said.
Rio has beat the drum of relative momentum loudly as its prime defence against its larger suitor. Mr Toyne said: "The compound annual growth projections are quite eye-catching. Making that assertion is absolutely central to Rio's defence."