BHP Revised Rio Bid, Earnings Drop

123jump.com Staff
06 Feb, 2008
New York City

BHP billiton revised its offer for Rio Tinto to $147 billion from $127 billion. The revised offer now values the company at 3.4 BHP stock to 1 stock of Rio. Chinalco and Alcoa may make a offer for Rio after purchasing 9% stake in Rio. Seprately, BHP reported lower earnings on higher operating costs. Stocks in Australia fell 3.2% on the sharp decline in global markets prompted by a weak read on the U.S. service sector in January. Markets in Asia, Europe, and Australia fell sharply.

[R]3:00AM New York, 7:00PM Sydney- ASX 200 index fell 3.2% after loses in resource and financial stocks.[/R]

Market Sentiment

ASX 200 index lost 3.2% or 183.5 to close at 5,609.40.

The Preliminary market turnover was 407.7 million shares worth $861.4 million, with 108 stocks closing up, 774 stocks down, and 224 unchanged.

Market Driver

BHP Billiton revised its offer for Rio by 13% to 3.4 stocks of BHP to one Rio Tinto stock. BHP disclosed the new offer in a statement to the Australian stock exchange today. BHP had been given until today by the UK Takeover Panel to formalize its offer or walk away for six months.

If successful, the takeover would result in BHP shareholders owning 56% of the merged entity and Rio Tinto investors will control 44%.

BHP Billiton CEO Marius Kloppers said that the offer, which sought to create a """"diversified resources industry super-major"""" represented a 45% premium on the fair trading value of Rio Tinto stock, which shot up after BHP Billiton first revealed it had proposed a takeover late last year.

Rio Tinto acknowledged the new offer in a statement and urged shareholders to wait for the board to review the revised offer. The offer is dependent on acceptances from shareholders owning more than 50% of the publicly held shares in each of Rio Tinto Limited and Rio Tinto plc.

Media reports in Britain today said Aluminum Corp of China, Chinalco and Alcoa, which acquired 9% of Rio, when counting the share traded in Australia, are expected to make a counter offer. Earlier Chinalco and Alcoa paid $14.2 billion for a stake in Rio Tinto.

However other media reports from Britain said sources familiar with the situation had said the Chinese were in no rush to make a next move. Meanwhile BHP''s first-half profit fell 2.4% because of higher production costs. Net income was $6 billion in the six months ended December 31, from $6.2 billion a year earlier.

BHP said costs increased 1.9% in the half and forecast the global economy will slow. Kloppers projected $3.7 billion in cost savings and revenue gains in the event of merger between the two companies.

The underlying earnings before interest and tax declined $506 million due to a weaker dollar. Earnings for the aluminum, stainless steel materials and coking coal units fell.

BHP fell 7.4% while Rio shed 1%.

Gainers and losers

Of the ASX 200 index shares, Telstra Corp led the gainers with a rise of 5% followed by increases in Telstra Corp of 3%, in Compass Resource of 1.8%, AWB Limited in of 1.4%, and in Babcock and Brown of 1.1%.

Of the ASX 200 index stocks, Perilya Limited led the decliners with a fall of 11.5% followed by losses in Centro Properties of 10.2%, in Centro Retail Group of 9.4%, in FKP Property Group of 9.2% and in IOOF Holdings LT of 9.1%.

Moss to leave Macquarie

Investment bank, Macquarie Group''s managing director and chief executive officer Allan Moss has announced that he is stepping down from the position in late May after more than 15 years at the helm.
Moss will be replaced by the current head of Macquarie Capital, Nicholas Moore. Moore, 49, who runs the division that generates more than 50% of profit, assumes the top job on May 24. Macquarie stock fell 9%.

Primary on Symbion takeover

Primary Health Care Ltd has indicated that it would declare its takeover bid for Symbion Health Ltd unconditional if it achieves an interest in Symbion of 50.1% by the end of February 12. Primary is offering $4.10 per share for Symbion, valuing the target at $2.65 billion and would not raise it in the absence of a competing bid.

Primary said that as of February 5 it had interests in Symbion - including acceptances under the offer and acceptance instructions under an institutional acceptance facility - of 45.59% of Symbion shares.

Primary is battling private hospitals operator Healthscope Ltd for control of Symbion''s pathology, diagnostic imaging and medical centres, referred to as the diagnostics businesses. Healthscope has 11.91% stake in Symbion.

Healthscope has twice attempted to secure Symbion''s diagnostics assets. One bid was blocked by Primary and the other by an adverse tax ruling.

Australian Agricultural Company full-year profit down 64%

Cattle rancher, Australian Agricultural Company has announced that its full-year profit fell 64% on gains in the local currency and higher feed prices.

The country''s biggest cattle rancher said net income fell to $3.6 million, in the 12 months ended December 31, from $10.1 million a year earlier.

Earnings per share dropped to 1.4 Australian cents, from 4 cents a year earlier. Full-year sales rose 27% to $249 million. Australian Agricultural stock fell 2.3%.

Stockland''s first-half profit up 11%

Australia''s largest housing developer Stockland reported first-half profit increase of 11% after the company broke its dependence on the housing market by venturing into retirement villages and shopping malls. The company earned $324.6 million in operating profit excluding gains from asset valuations, from $293.1 million a year ago.

Managing Director Matthew Quinn has spent more than $1 billion buying shopping centers, retirement villages and offices, and making his first European purchase. Australian sales of new homes slowed as the central bank raised interest rates seven times since 2004. Stockland fell 3%.