In the stuffed world that we are all being told is coming, I cant see how RIO can withstand to BHP offer. The $3billion in savings they expect to generate in the Pilbara will provide an overwhelmingly compelling case for the deal to succeed.
The offer is a significant premium to present share price and RIO itself is talking down its own future. Time to bring in some professional management that sees the opportunities in China not the down side!
The investment banking community needs this deal to go through. I heard a rumour that the transaction fees will be something in the order of $5 Billion. IF true, it will help the advisors stay in the bonuses.
For my money, it's a done deal! Imagine buying a BHP/RIO merged entity at $19.40. That is what today's buyers are getting a chance at! But the way the market is going, it may not be long before you get that option at $10!
While Chinalco's shares are tied up in Lehmans they might have difficultly preventing the deal. And I suspect the liquidator would love the potential upside in the shares of a merged BHP/RIO. Going to be very interesting.
RIO Price at posting:
$52.06 Sentiment: Hold Disclosure: Held
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