BHP May Consider Taking Offer to Rio's Shareholders

Mining giant BHP Billiton, whose multi-million-dollar takeover plan has been rejected by Rio Tinto's management, may consider taking an offer directly to Rio's shareholders in the future, BHP's chief said on Saturday.

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In the meantime, BHP Billiton is aiming to bring Rio's board to the table by asking Rio shareholders to put pressure on management, Chief Executive Marius Kloppers told a media briefing in Johannesburg.

"We are talking directly to shareholders; we ask shareholders to ask management to engage to deliver this."

BHP officials have talked to more than half of Rio's institutional shareholders over the past week after announcing its proposal to forge a world mega-miner controlling much of the world's supply of raw materials, he said.

Rio Tinto said after BHP unveiled its plans that the three-shares-for-one takeover proposal "significantly undervalues Rio Tinto and its prospects."

Value Dropped as Shares Declined

The firm's all-share proposal was worth $140 billion before the plans were announced, but has declined in value to around $126 billion as BHP shares slipped.

Kloppers was asked how long BHP would wait for talks with Rio management before taking a bid directly to Rio shareholders.

"We are hopeful that management will engage with us, but certainly that is one of the options that should be considered down the track, but that is simply not a decision that we've got to take today."

He stressed that BHP had not made a formal offer, but had only presented a proposal to Rio's management.

"At a certain moment in time, the UK regulators will ask you to either make an offer or not, but we are only at the start of that process."

No Comment on Counter-Bid

Kloppers declined to comment on a newspaper report that Rio Tinto was considering a counter-bid for BHP as a defence against the takeover proposal from its bigger mining rival.

The Wall Street Journal, citing unnamed sources, reported on Friday that Rio was considering a broad array of potential options to fight off BHP, including a counter-bid, selling assets and other moves that could raise shareholder value.

Analysts, however, said Rio was unlikely to counter-bid as expectations were growing that BHP may sweeten its offer, and it might be difficult anyway for the smaller Rio to pull off such a move.

Rio is due to hold an investor briefing on Nov. 26 to give details about its views on BHP's proposal.

Kloppers was asked whether the market was pricing in a higher bid from BHP, since the value of Rio's shares were around 12 percent higher than the value of BHP's proposed offer.

"We are still in our education process on how this deal will be consumated, if we can do that, what the benefits are," he said, referring to talks with both sets of shareholders.

He declined to say if BHP would consider a cash element as part of a formal bid.

Kloppers said initial contact was made with Rio Tinto about a merger in April, before he took over the leadership of the firm last month, and two approaches regarding the current proposal were made "recently," but he declined to be more specific.

"Some parts of this combination have been explored for decades," he added.