Newspaper article The Evening Standard (London, England)

BHP Lights a Fire under Investors with Rio Bid

Newspaper article The Evening Standard (London, England)

BHP Lights a Fire under Investors with Rio Bid

Article excerpt


WHAT a fickle lot stock-market investors are. Early today, they werecounting the cost of the credit crunch and braced for another sell-offfollowing hefty falls on Wall Street overnight and in Asia this morning. Thenalong came mining giant BHP Billiton to confirm what the rest of us hadsuspected it wanted to bid for Rio Tinto.

Suddenly, the gloom hanging over the Square Mile lifted, enabling the FTSE 100index to stage a 125-point turnaround in a matter of minutes. The reluctance ofthe Bank of England monetary policy committee to cut interest rates hardlywarranted a second glance.

The indicator of leading shares had been down almost 95 points first thing aspunters weighed up the latest sell-off on Wall Street, which had left the Dowdown 360 points.

But news that the Rio Tinto board had rejected an offer of three BHP Billitonshares for each of its own quickly had the market buzzing again and the Footsiewas soon sporting a rise of 26.7 at 6411.8.

If the takeover were to succeed, it would create a mining giant worth almost[pounds sterling]95 billion. Rio Tinto responded to the news with a leap of 1374p, or almost32%, to 5724p, while BHP Billiton was 6p better at 1762p. It is just a fewweeks since Rio absorbed Alcan in a deal worth [pounds sterling]19 billion. Now Cityspeculators are looking forward to more consolidation in the mining sector.

Peter Meinertzhagen, chairman of Hoare Govett, says this is just the start ofequity-for-equity deals, now that the lack of liquidity has dried upprivateequity deals. "Companies are now being forced to use their own paper inorder to make acquisitions," he adds.

The move for Rio focused attention on other miners. In fact, mining shares madeup seven of the top 10 best-performing blue-chip stocks.

There were gains for Xstrata, up 348p at 3573p, Anglo American, 290p better at3461p, Lonmin, 279p higher at 3545p, Antofagasta, 641/2p to the good at 845p,and Vedanta Resources, up 165p at 2241p. …

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