Rio Hits Back at BHP Offer in Chairman's Letter
Saying it had strong growth potential on its own, mining company Rio Tinto on Thursday again rejected an unsolicited offer from larger rival BHP Billiton.
Rio Tinto Chairman Paul Skinner said in a letter to shareholders that was posted on the Australian Securities Exchange that the company's outlook was "exceptional" because of rising demand for resources from developing countries.
He said the bid from BHP Billiton was rejected "as it significantly undervalued Rio Tinto and its prospects."
Skinner pointed to Rio Tinto's potential in iron ore, copper and aluminum, saying the company was well positioned to "capture strong growth in demand in the developing economies, including China and India."
Skinner also said he was pleased that Britain's takeover regulator had agreed to give BHP Billiton until Feb. 6 to either formalize its proposal to buy Rio Tinto for around $130 billion or say it is not interested.
The move comes after Rio Tinto, which is headquartered in London but also listed in Australia, invoked Britain's so-called "put up or shut up" laws, which stipulate that a company subject to a potential bid can request that a time limit be imposed on would-be buyers to clarify their intentions.
The British deadline now forces BHP to come up with a formal offer or drop its bid altogether. If it does not meet the deadline, BHP must wait another six months from Feb. 6 to make a fresh proposal.
BHP Billiton accounts for around 15 percent of world iron ore sales, while Rio Tinto is responsible for 24 percent, which would put the combined company at 39 percent. Global steel makers fear the two companies operating as a single unit would have too much influence over raw materials prices.