$102b Rio bid off, BHP set for next tilt

IT IS back to basics for BHP Billiton.

The miner's year-long hostile tilt at Rio Tinto came to an official close yesterday when the UK Takeover Panel and European Commission allowed it to drop the $US66 billion ($102 billion) bid rather than wait for the competition regulator to block it in mid-January.

At BHP's annual meeting in Melbourne yesterday its chairman, Don Argus, told shareholders the "almost unprecedented global financial crisis" meant forming a $US84 billion company with $US78 billion of debt through the merger was not an attractive option.

When BHP made an official 3.4-for-1 scrip bid for Rio in February it would have formed a $US298 billion mining colossus with $US87 billion in debt.

The decision to allow BHP to officially drop its bid means it can now use its flexible balance sheet to restart its dormant share buyback program, increase dividends or make acquisitions. Whatever option or combination it chooses, its target is to maintain a strong, single-A credit rating.

A resumption of the share buyback, an option preferred by many investors, would not occur without board approval, meaning it will have to wait at least until the next time directors meet.

Mr Argus ruled out the possibility of BHP scrapping its dual-listing in favour of a single domicile in Australia.

The meeting was notable for the near-absence of questions about the failed takeover bid, which will force BHP to take a $US450 million write-down over the fees involved. Only the shareholder activist Stephen Mayne, who yesterday failed in his bid to become a BHP director, posed any direct questions to Mr Argus about the abandoned offer.

The most popular topic with other shareholders was the environmental and security aspects of BHP's planned expansion of its Olympic Dam copper-gold-uranium mine in South Australia.

But in a media conference after the meeting the company's chief executive, Marius Kloppers, placed the blame for spending $US450 million on the failed Rio bid solely on himself.

"There is only one person accountable and that's me," he said. The deterioration of commodities markets over the past six weeks meant the deal would no longer have created enough value for BHP shareholders.

The company is convinced that, in the longer term, demand for metals will rise sharply in emerging economies, particularly China. Mr Kloppers said short-term conditions were clearly weak but the medium-term outlook was hardest to predict.

BHP has a strong enough balance sheet to spend billions on growth projects in the hope that demand will recover by the time the mines are built. Mr Kloppers said BHP would turn its attention to other acquisitions."We don't target specific metals for growth," he said. "We assess it on an opportunity by opportunity basis."

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