Off Egoli this morning BHP almost up to 20% of WMR.
BHP – Why we like it
If >50% of acceptances are achieved within the last seven days, then the offer will be extended another two weeks. However, we understand that BHP could extend the offer with approval from ASIC even if the bid does not go unconditonal. They are well on their way. As of yesterday morning BHP owns 17.64% of WMR. Good progress considering Northern Hemisphere on holiday
POSITIVE SIGNAL FOR BHP Positive for BHP for three reasons 1) indicates BHP is not willing to pay any price and is still returns focussed; 2) deadline likely to encourage funds using WMR as a cash proxy to accept; 3) even with 50.1% of WMR, we believe there are significant synergies;
FUNDAMENTALS ALSO STILL FAVOUR BHP => Strong balance sheet (FY06e is net cash without WMR and gearing of ~40% with WMR) => The bulk commodities cycle is not yet over. => Weakening A$ has potential to expand bulk margins. BHP will also be the benefactor of WMR leaving the index, along with the next 25% downweight of NWS and NWSLV, the removal of SRP and NFD, and the potential removal of FOA and PHY, this is likely to create a squeeze in the S&P/ASX 200 with A$25bn set to leave the indices
