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Gold/Mining/Energy : Mining News of Note -- Ignore unavailable to you. Want to Upgrade?

To: LoneClone who wrote (29456)	11/25/2008 9:54:37 AM
From: LoneClone	Read Replies (1) \| Respond to of 193721

Winners and Losers from BHP-Rio Collapse Posted by Dana Cimilluca blogs.wsj.com BHP Billiton’s hostile offer for fellow miner Rio Tinto was one of the few remaining bright spot in the wasteland now known as M&A. No more. The collapse of the all-stock deal, once valued at more than $140 billion, could be the last nail in the coffin of the great M&A boom of ‘04-’07. And it adds to the pall over Wall Street and the City. Below is a list of some of the biggest losers from the surprise development. Oh and a few winners. LOSERS: Rio shareholders. Rio shares tumbled 36% on the news, and trade at 1.4 BHP share — a far cry from the 3.4 BHP shares that were on offer. Rio’s London shares have now cratered 70% this year. Arbs. After being burned on so many other collapsed deals lately, some merger-arb investors may have been encouraged to take a chance on BHP-Rio given the repeated assurances of BHP management led by Marius Kloppers that they were committed to the deal. They may also have been encouraged by the InBev-Anheuser Busch deal, which closed this month after much teeth-gnashing about whether it would fall through. Arbs that paid attention to such signals were reminded this morning that this has been the worst year ever for them. Rio management. Led by CEO Tom Albanese, Rio officials repeatedly insisted that their rejection of BHP’s offer was “all about value.” Some Rio shareholders may now be asking Albanese why he didn’t agree to a deal with BHP while he could, and possibly secure a firmer commitment from BHP in the process. Rio management has also been suggesting that the company’s stock didn’t have too far to fall in the event of a collapse of the deal. So much for that. BHP CEO Marius Kloppers. BHP launched the bid for Rio just weeks after Kloppers took over, making it not just his signature, but pretty much his only act so far as CEO. The $450 million BHP said it sunk in the deal would have gone a long way toward binding up the wounds the global economic slump is inflicting on the company. (Kloppers — and Albanese — of course can’t be blamed entirely given the breathtaking change in circumstances they’ve experienced in the past year.). Alcoa. The $1 billion or so the U.S. aluminum company invested in Rio along with China’s Chinalco earlier this year is now worth less than $200 million. By forcing BHP to raise its offer then, the group, known as Shining Prospect, may have ultimately contributed to the scuttling of the deal, and the plummeting of their stake. Bankers/lawyers. The legion of advisers on the deal — led by Goldman Sachs advising BHP and Morgan Stanley advising Rio — were counting on the juicy fees in an otherwise barren year. Much of what BHP has paid out already is the cost associated with a debt facility it lined up for the deal. The bulk of the M&A fees, which would have topped $100 million, were likely yet to be paid. With this deal dead, M&A bankers and lawyers are going to have an even harder time finding work. WINNERS: China. Even though on paper the Chinese have lost some $10 billion on their Rio investment, it may still have been money well spent. The benefits from keeping two of their steelmakers’ biggest suppliers of iron ore from joining could far outweigh any such loss, one banker working on the deal said. Steelmakers. Companies that had been complaining that the deal would reduce competition for their main input — iron ore — will breathe a sigh of relief. Now they can focus exclusively on their own dismal demand outlook. BHP shareholders. BHP shares are up 15% on the news, indicating that in spite of all the effort Kloppers & Co. have wasted on the deal, they’re happy to let it go.