The Times of London reports that metals company Rio Tinto (RTP) plans an all-out attack against suitor BHP Billiton (BHP). According to the paper "Tom Albanese, Rio’s chief executive, will highlight his firm’s record of identifying and exploiting mining assets, and attack BHP’s track record and claims for synergies in combining the two companies." The Times adds "a combination of BHP and Rio would create a natural-resources giant controlling almost 40% of internationally traded iron ore."
Rio Tinto shareholders should take the BHP deal ASAP, especially if they can get a piece of it in cash. RTP shares are up 110% since the beginning of the year, and, so far there is no other buyer for the company. The stock traded at $221 this last August and moved over $480 last week.
Part of the argument against the deal is that there are not "synergies" between the two companies and that cost cutting will not produce significant savings going forward. But, Rio Tinto is buying Alcan based on similar assumptions. Neither party in that transaction has said that the math is faulty.
Time for Rio Tinto to sell out.
Douglas A. McIntyre
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