BHP tightlipped on Alcoa takeover plans
Tuesday, 17 July 2007
SYDNEY, July 16 (AFP): The world's biggest miner, BHP Billiton, was tightlipped today on reports that it is considering making a 50 billion US dollar takeover bid for US aluminium giant Alcoa Inc.
The move would top Rio Tinto's 38.1 billion dollar offer for Canadian aluminium group Alcan Inc announced last week, and analysts rated it a possibility.
Alcoa's decision to drop its 28 billion dollar offer for Alcan when Rio Tinto stepped in as a "white knight" last Thursday meant the US company was now itself a potential target, they said.
A Melbourne-based spokeswoman for BHP Billiton said it was her group's policy not to comment on merger and acquisition speculation.
She also declined to comment on reports that BHP Billiton had briefed Merrill Lynch on its interest in pursuing Alcoa.
ABN Amro resources analyst Warren Edney said the global alumina and aluminium sector's ownership was clearly in play as the world's largest miners seek to utilise strong cash flow resulting from high commodity prices to fund future growth.
"(Alcoa) may be a better (acquisition) than Alcan because of its alumina refining capacity," Edney said.
A BHP Billiton bid for Alcoa might involve private equity players as there were downstream aluminium components of Alcoa that it would not want, such as Alcoa's aluminium sidings business, he said.
"Any combination is possible and you can't rule out CVRD being involved," Edney said, referring to Brazilian mining giant Companhia Vale do Rio Doce, another potential acquirer of Alcoa.
Only time would tell whether BHP Billiton would make a bid for Alcoa and also possibly seek to acquire Australian-listed Alumina Ltd, said Peter O'Connor, resources analyst at Credit Suisse.
Alumina is Alcoa's 40 per cent partner in the Alcoa World Alumina & Chemical joint venture which operates some of the world's lowest cost alumina refineries, including refineries in Western Australia.
O'Connor said a full cash offer of around 50 dollars a share for Alcoa would increase BHP Billiton's gearing to 63 per cent from just 18 per cent a year ago.
But, he said, asset sales and strong cash flow of about 12 billion dollars a year could reduce BHP Billiton's gearing to 41 per cent by 2009, which made an offer financially possible.
The move would top Rio Tinto's 38.1 billion dollar offer for Canadian aluminium group Alcan Inc announced last week, and analysts rated it a possibility.
Alcoa's decision to drop its 28 billion dollar offer for Alcan when Rio Tinto stepped in as a "white knight" last Thursday meant the US company was now itself a potential target, they said.
A Melbourne-based spokeswoman for BHP Billiton said it was her group's policy not to comment on merger and acquisition speculation.
She also declined to comment on reports that BHP Billiton had briefed Merrill Lynch on its interest in pursuing Alcoa.
ABN Amro resources analyst Warren Edney said the global alumina and aluminium sector's ownership was clearly in play as the world's largest miners seek to utilise strong cash flow resulting from high commodity prices to fund future growth.
"(Alcoa) may be a better (acquisition) than Alcan because of its alumina refining capacity," Edney said.
A BHP Billiton bid for Alcoa might involve private equity players as there were downstream aluminium components of Alcoa that it would not want, such as Alcoa's aluminium sidings business, he said.
"Any combination is possible and you can't rule out CVRD being involved," Edney said, referring to Brazilian mining giant Companhia Vale do Rio Doce, another potential acquirer of Alcoa.
Only time would tell whether BHP Billiton would make a bid for Alcoa and also possibly seek to acquire Australian-listed Alumina Ltd, said Peter O'Connor, resources analyst at Credit Suisse.
Alumina is Alcoa's 40 per cent partner in the Alcoa World Alumina & Chemical joint venture which operates some of the world's lowest cost alumina refineries, including refineries in Western Australia.
O'Connor said a full cash offer of around 50 dollars a share for Alcoa would increase BHP Billiton's gearing to 63 per cent from just 18 per cent a year ago.
But, he said, asset sales and strong cash flow of about 12 billion dollars a year could reduce BHP Billiton's gearing to 41 per cent by 2009, which made an offer financially possible.