Issues on Bhp Billiton Offer for Rio Tinto

A Report on Analysis
of Some Issues on BHP Billiton Offer for Rio Tinto

Executive Summary
The recently announced offer by BHP Billiton to Rio Tinto has given rise to a great disturbance in the industry. This report provides an in-depth analysis on the bid, attempting to address the following issues:

Key Benefits and other affected stakeholders
It is specified that significant values can be delivered to Rio Tinto shareholders from
– Optimized mineral resources and complementary infrastructures,
– Enhanced platform for future growth options
– World-class management team
It is also identified that customers are expected to benefit from this business combination.

Prohibited activities by Rio Tinto
It is outlined in the terms of offer that some business conducts are prohibited from undertaking by Rio Tinto during a certain period, including
– Dispose, offer to dispose or agree to dispose of any Iron Ore Assets,
– Recommend, declare or make any bonus, dividends or other distribution,
– Enter into, renew or change the terms of contract with any material member of the group

Terms of the offer and costs of acquisition
Terms of the BHP Billiton offer are outlined in the report, and calculation of the acquisition costs is made based on the terms and other relevant information. Two additional amounts, being the incidental costs and the contingent adjustments, are identified and specified according to relevant AASB requirements.

Effect of change in exchange rate on the offer
It is found that a material change in relative exchange rate would significantly increase the risk of the offer, depending on different effects on each segment of shareholders
Introduction
On February 6, 2008, BHP Billiton announced a formal $US147.4 billion hostile bid for Rio Tinto. After a thorough investigation into relevant materials and information of this bid, this report has been written and structured into the following four parts, for the purpose of addressing... [continues]

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