china to get involved in rio takeover, page-12

Its so funny watching people say "The chinese" will buy RIO. Dont you think the state treasury, various steel mills and other players are all separate entities with separate motivations.

First if the Treasury whose job is to diversify the states investment of foreign currency reserves away from USD and into a broad basket of investments giving a safer broader return, is hardly likely to jump in and buy the whole thing. I think $140 billion in one company in one sector isnt really what they are after.

If the steel mills go for it, then they are buying a whole lot of other mineral production other than iron ore at a premium, to protect their iron ore input price. Still the iron ore is a big percentage of RIO. Its a massive buy for any single mill, and some of the other mills presumably have already been setting up contracts with FMG and others already.

More likely the treasury, and a couple of major mills would agree to go in for a blocking stake, and think it worth the premium despite having to take a loss when the share price drops away again. (No synergy means no sustainable PE of 20). But then the treasury would be going in knowing they would be making a loss, at the benefit of the steel companies.

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DYOR. All IMHO