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BHP Billiton, moving to shore up support for its hostile US$128 billion ($168 billion) offer for Rio Tinto Group, said most investors and many customers see the logic in the world's biggest mining takeover.
"The bottom line here is simple, these two companies are worth more together than
apart," Marius Kloppers, chief executive officer of the Melbourne-based company said yesterday.
The proposed combination would cut costs and deliver more raw materials faster to customers to feed surging demand for goods and buildings led by China, Kloppers said. Rio has said the offer undervalues the world's third-largest mining company and is "way out of the ballpark".
"BHP will come back with a better offer and if they throw in some cash I think the investors would be quite happy with that," Juliana Roadley, market analyst at Commonwealth Securities in Sydney, said.
BHP could afford to add US$27 billion cash to its proposed three-for-one stock offer for Rio, UBS AG said this month.
"We remain hopeful and confident that Rio Tinto will engage with us on this important proposal," Kloppers said to a meeting of shareholders in Adelaide.
"It is not a question of us needing them or them needing us."
The combined company would control about 38 per cent of iron-ore exports, the same as Brazil's Cia Vale do Rio Doce, according to Australia & New Zealand Banking Group. BHP and Rio would be the largest aluminium producer, the largest shipper of coal and supply about 6 per cent of all copper.
Metal prices will remain "high and volatile" in the short term, BHP chairman Don Argus said at the meeting, driven by demand from China.
India is becoming an emerging customer of many metals and has some of the same fundamentals of China, he said.
BHP's hostile bid has angered iron ore customers Posco, Korea's biggest steelmaker, and Japan's JFE Steel.
The record commodities acquisition will raise iron ore prices and should be blocked by regulators, the steelmakers say.
"We have engaged in open dialogue with our customers," Kloppers said. "Many already see the logic of our proposal and the benefits of more product to the market more quickly."
A merger would create an "unrivalled business", as well as risks related to difficulties combining the two businesses, Standard & Poor's credit analyst Alex Herbert said yesterday.
- Bloomberg