BHP Billiton

Paper Summary:

This paper relates that, in strategic management, mergers and acquisitions are generally done with the motivation of company and revenue growth. The paper then looks at how, for this reason in particular, BHP Billiton, already significant in size as the world's largest mining company, offered Rio Tinto an initial takeover fee of $127 billion. The paper also discusses how a merger would significantly increase not only BHP's size, but also its worldwide power and control over commodity markets. The paper then examines the implications of such a takeover for both stakeholders and investors.

From the Paper:

"Indeed, there has been considerable controversy relating to the offer in terms of the global commodities market, with particular focus on the iron ore market, precisely because of the monopoly issue. BHP needs to obtain approval from antimonopoly authorities for the planned merger, as BHP and Rio already control about three quarters of global iron ore exports. With news of BHP's offer to Rio Tinto, Iron ore buyers in China, Japan and South Korea have suggested that regulators should block the proposed deal. On the other hand, it is also suggested that iron ore shortages are likely to result in price increases of more than 50 percent for the steelmaking companies involved (Arnold). Mr. Kloppers traveled to the three objecting parties to attempt to negotiate approval with them."

Sample of Sources Used:

• Arnold, Wayne. BHP's record offer not enough, Rio Tinto chief says. International Herald Tribune, Nov. 26, 2007. http://www.iht.com/articles/2007/11/26/business/mine.php
• Fat Prophets. BHP Billiton Enhanced Bid for Rio Tinto. The Market Oracle, Feb 8, 2008. http://www.marketoracle.co.uk/Article3647.html
• Werdigier, Julia. BHP Billiton Launches Hostile Bid For Rio Tinto. New York Times, Feb 6, 2008. http://www.nytimes.com/2008/02/06/business/worldbusiness/06mine.html

More papers on BHP Billiton:

• Analytical Essay # 140577 : "BHP Billiton's CSR Disclosures"
• Case Study # 147644 : "BHP Billiton Plc"
• Analytical Essay # 142616 : "Accounting at BHP Billiton Petroleum and NOPSA"

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