BHP bid 'may not even occur', Rio tells shareholders

In a letter to shareholders, Rio chairman Paul Skinner said the antitrust clearance provisions in BHP's bid "could take months to satisfy and may not even occur".

The statement was surprising not because of Mr Skinner's call that antitrust clearance could take months but because he made his most direct comment yet that clearance for BHP might not be forthcoming.

While Rio has previously dismissed the proposed 3.4-for-1 scrip offer by BHP as failing to fully recognise its underlying value, it has baulked at ruling it out on antitrust grounds as such a strategy could erode any takeover premium in the stock.

As it was, Rio performed poorly in yesterday's sharemarket rebound. BHP put on 60, or 1.62%, to close at $37.60 while Rio managed only a 17, or 0.15%, gain to $110.25.

Rio's closing price was equal to 2.93 BHP shares, its lowest level since BHP made its first approach last November. Rio is trading at a 13.7% discount to the imputed value of BHP's bid.

Mr Skinner's letter to shareholders - it was mainly about the group's record June-half profit and future prospects - followed last week's announcement by the Brussels-based European Commission that it had suspended its detailed phase 2 review of BHP's mega-bid with effect from August 25 due to BHP failing to meet a request made on August 13 for more information.

The suspension means the EC's previous December 9 deadline for a decision will not be met, with a new deadline to be set once the requested information is received.

While suspensions of investigations in the EC's intensive phase 2 investigations are not uncommon, its application in the BHP-Rio case reignited the debate about whether BHP could eventually gain clearance in the face of hostile opposition from European and Chinese steel makers.

BHP chairman Don Argus has also written to shareholders, ostensibly also in relation to the group's record June-year profit performance and outlook.

He said BHP continued to expect that the regulatory review process "will be completed by around the end of the 2008 calendar year". "This may seem to some to be a very slow process, but let me assure you that this time frame is not unusual for a transaction of this nature."

The reporter owns BHP shares.

LINK

? Read Rio's letter to shareholders at tinyurl.com/6dym5z