BHP, Rio tipped to join the fray

ALCOA has extended its $US27 billion hostile bid for Alcan as speculation mounts that Rio Tinto and BHP Billiton will barge in on the North American aluminium takeover contest. Since the Herald reported there was a growing expectation there would soon be a major development, Rio has been linked to a bid for Alcan in the London business press. Additionally, The Times of London said yesterday BHP was understood to have begun discussions with private equity firms, including Blackstone Group, on a potential bid for Alcoa. It is believed both BHP and Rio would be interested in selling Alcoa or Alcan's downstream assets to private equity. Apart from Blackstone, which counts former Alcoa chief executive Paul O'Neil as an adviser, sources have suggested TPG Capital and Apollo Asset Management might also be interested in the downstream assets. Several sources previously said it would not be surprising if Rio purchased Alcan and BHP bought Alcoa, due to the locations of their assets. After a briefing with incoming BHP chief executive Marius Kloppers in London, UBS analysts said he indicated the company would maintain its focus on purchasing only top-tier assets. "[Mr Kloppers] does agree that Alcan's smelters and Alcoa's alumina assets are Tier 1 quality, but that cherry-picking was not likely to be possible," UBS said. If BHP bid for Alcoa, it might launch a simultaneous offer for Melbourne's Alumina, which owns 40 per cent of the Alcoa World Alumina and Chemicals refining business in a joint venture with Alcoa. Otherwise, BHP would be forced to sell 40 per cent of its refining assets to Alumina under the provisions of the joint venture agreement. BHP purchased a 4.3 per cent stake in WMC Resources through cash settled derivative contracts ahead of its $9.2 billion bid for the company in 2005, but it is understood Alumina has recently examined its share register and does not think a corporate player holds an interest. Alcoa yesterday extended its offer by another month, to August 10, as it seeks approvals from competition regulators around the world. The Australian Competition and Consumer Commission has already received a submission from Alcoa. Submissions from other interested parties are due this Friday, and the ACCC expects to announce its findings on August 15. Meanwhile, Alcoa yesterday reported second-quarter earnings of $US716 million, down from $US744 million during the same period last year. Profits from its alumina division rose to $US276 million - $US16 million higher than the previous quarter - due to higher overall prices and shipments, even though the earnings were partially offset by a rising Australian dollar.