SYDNEY - Takeover target Rio Tinto Ltd has issued a letter to shareholders advising them to take no action over BHP Billiton Ltd's US$147.40 billion ($189.82 billion) bid.
The letter, being sent to Rio's shareholders tomorrow, states that the boards of Rio "have given careful consideration to BHPBilliton's pre-conditional offers and have concluded they still significantly undervalue Rio Tinto".
"Accordingly, the Boards have unanimously rejected BHP Billiton's pre-conditional offers as not in the best interests of shareholders," it said.
Rio said BHP's offers, while improved, still fails to recognise the underlying value of Rio's assets and prospects.
"Our plans are unchanged, and will remain so unless a proposal is made that fully reflects the value of Rio Tinto.
"We are forging ahead with our strategy of operating and developing large-scale, long-life, low-cost assets to generate significant value for shareholders," it said.
Rio said the boards believe that the company is poised for exceptional growth.
"Rio Tinto is ideally positioned to supply the world's increasing raw materials demand and to continue to create and deliver value for our shareholders," it said.
Rio said BHP's announcement was not a firm offer and advised its shareholders that there was no formal offer for them to consider.
"You do not need to take action," Rio said.
"BHP Billiton has merely announced its intention to make formal offers if certain pre-conditions are met.
"BHP Billiton has said that the satisfaction of these pre-conditions, relating to competition law and foreign investment approvals, may not occur until the end of 2008."
Last week, Rio rejected BHP's 3.4 for one scrip bid, saying it significantly undervalued the world's third largest mining company.
