BHP Billiton Restates Logic Of Rio Tinto Offer

MELBOURNE -(Dow Jones)- BHP Billiton Ltd. (BHP.AU) Wednesday stepped up its pressure on Rio Tinto Ltd. (RTP) to discuss a US$156 billion takeover proposal and said the superior performance of its businesses underpins its all-share offer.

Rio Tinto has rejected the three-for-one all share proposal, which it now describes as "dead in the water".

But BHP shows no signs of altering its offer and has restated its commitment to the proposal. It said in a statement to the Australian Stock Exchange ahead of a briefing to analysts that it continues to seek discussions with Rio Tinto and is considering its options.

BHP Billiton Chief Executive Marius Kloppers said in the statement that, as an all-share proposal, the deal was about relative value of the two companies and that BHP has outperformed its target.

BHP highlighted its growth profile and its track record of delivering production growth and investing capital, all of which it said were superior to Rio Tinto’s.

"This demonstrated outperformance has generated a superior total shareholder return for BHP Billiton shareholders and BHP Billiton’s superior growth prospects position us well to continue our outperformance," Kloppers said.

Rio Tinto Chief Executive Tom Albanese has said repeatedly that the rejection of BHP’s proposal was "all about value".

Kloppers said BHP’s latest presentation addressed value and aimed to remind the market that, before it launched its proposal, Rio Tinto’s market capitalization was about half of BHP’s.

A spokesman for Rio Tinto said the company hasn’t changed its position on the proposal as the value equation does not stack up.

"We don’t believe that the BHP’s rejected proposal properly valued what Rio Tinto would bring to the combination," he said.

Kloppers would not be drawn on whether BHP would consider raising its offer and said the current proposal is compelling.

BHP said meetings with shareholders had shown investors have a clear understanding of the logic of the combination of the two companies.

The Melbourne-based miner said Wednesday’s presentation is in part a response to a request from some shareholders for a more detailed picture of the relative outlook and position of the two companies.

As part of outlining the value of its assets, BHP gave more detail on its planned expansion of the giant Olympic Dam copper and uranium mine in South Australia.

BHP outlined a three-stage program to take output to 730,000 metric tons of copper a year, up from previous plans to raise copper output to half a million tons, and uranium to 19,000 tons, up from a previously planned 15,000 tons.

Kloppers said it is too early to talk about the cost of the expansion.

The Australian iron ore businesses of the two companies are at the center of the proposed transaction, with Rio Tinto producing more tons and widely viewed as more advanced in its expansion plans.

However Kloppers said BHP has bigger iron ore bodies that are more easily and profitably developed.

"If anything we believe we have got the superior business," he told reporters.

Rio Tinto Tuesday said it has made an application to the U.K. Takeover Panel that, if successful, could mean that BHP is given a deadline to make an offer or walk away under the U.K.'s so called "put up or shut up" rules.

Kloppers said BHP did not feel rushed by the move and that generations of BHP management have been considering this transaction.

"We are a patient company and we will take a decision, if any, in due course," he said.

"There is no sense of urgency at all on this side and again discipline and value is what we are all about for our shareholders."

Rio Tinto’s Australian listed shares ended down 3.1% at A$142.00, while BHP shares fell 2.3% to A$43.20 in a broader market down 0.9%.

Those closing prices mean Rio Tinto is trading at a 9.6% premium to BHP’s all share proposal, which is valued at US$156 billion, based on latest market prices.