Rio board stands firm on BHP bid
January 30, 2009
This story by Jamie Freed appeared in SMH on April 25, 2008 after Rio's 2008 AGM
RIO Tinto shareholders in Brisbane yesterday may have witnessed the company's last annual meeting as an independent company.
But the miner's chairman, Paul Skinner, remained adamant his board would not accept BHP Billiton's $US147 billion ($155 billion) bid at the present 3.4-for-1 scrip price because it did not represent full value for Rio's growth prospects.
"Our perspective on any proposal or offer we may receive from BHP - or for that matter from anyone else - is one we look at in terms of long-term value, not something that happens quarter on quarter," he said.
"The momentum in our business continues to develop strongly."
Mr Skinner also promoted Rio's operating credentials in Australia, to help counter BHP chairman Don Argus's argument that the Big Australian was the true national champion.
"We carry the spirit of Australia with us in this company," Mr Skinner said. " I think we are as Australian as anyone in the corporate sense in this country."
He noted Rio had invested $30 billion in Australia in the past decade and employed 17,000 workers in the country, but rebuffed calls from the shareholder activist Stephen Mayne to move the company's headquarters from London to Australia.
During the meeting there were few direct mentions of BHP's bid and no criticism of the Rio board's refusal to negotiate a merger.
BHP has offered Rio a share of nearly 45 per cent in the merged company and has argued the bid is about relative value rather than absolute value due to its scrip nature.
BHP has outperformed Rio in recent weeks as a result of record coking coal and oil prices, and Rio's share price has consistently traded below BHP's 3.4-for-1 bid price.
Mr Skinner said he was not concerned about recent share price movements.
Earlier this week, BHP's chief executive, Marius Kloppers, lashed out at Rio's weaker-than-expected quarterly production report and claimed his rival had "missed the boat" on energy and on China.
Mr Skinner disputed those assertions. He noted Rio did not have an oil and gas business like BHP, but it did have a large uranium and energy
coal business.
He was particularly offended by the assertion his company had been slow to take advantage of the growing Chinese market.
"That really is, quite frankly, quite difficult to understand," he said, noting Rio's relationship with China began 100 years ago through the sale of borates from mines in the US and became serious about 40 years ago.
"We are investing in those sectors which carry the best fundamental leverage to China," he said. "Obviously iron ore, but our [purchase of the aluminium producer Alcan] last year was a call on shifting fundamentals, which are essentially driven by China."
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