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China's Baosteel Denies Bid for Rio Tinto

Reuters
Wednesday, 5 Dec 2007 | 8:10 PM ET

China's Baosteel group has no plan to bid for mining giant Rio Tinto and does not have the financial strength for such a bid, official Chinese media quoted Baosteel chairman Xu Lejiang as saying.

Rio Tinto
Rio Tinto

In an interview with the Shanghai Securities News, published on Thursday, Xu was quoted as denying an earlier report in local media that he had expressed interest in bidding.

"I did not say this. It is a fabrication of the media," Xu told the Shanghai Securities News. The official China Securities Journal carried a similar denial by Xu.

On Tuesday, a smaller Chinese newspaper, the 21st Century Business Herald, had quoted Xu as saying Baosteel, whose listed arm is Baoshan Iron & Steel, was considering a bid of at least $200 billion for Rio Tinto and that there was a large chance of a takeover effort going ahead.

Another miner, BHP Billiton, has approached Rio Tinto with a $125 billion all-share takeover proposal. There has been speculation that Baosteel, perhaps in cooperation with other Chinese steel makers, might bid for Rio Tinto to secure supplies of iron ore.

But Xu was on Thursday quoted as saying that Baosteel, China's largest steel maker, did not at present have the resources to mount a bid for Rio Tinto, or to prevent any merger with BHP Billiton.

He added that there was no compelling reason for the mining firms to merge, as they had other ways to enhance shareholder value. A merged company might end up limiting production to support the price of iron ore, he said.

Baosteel's listed arm, which accounts for over 75 percent of the group's steel output, has a market value of only $39 billion, much smaller than BHP Billiton's proposal.

A senior executive at the Shougang Group, another major Chinese steel maker, told Reuters earlier this week that it would not be involved in any Chinese bid for Rio Tinto and was not aware of such a bid.

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