BHP's Argus Tells Rio Investors Takeover to Add Value

July 30 (Bloomberg) -- BHP Billiton Ltd.'s Chairman Don Argus wrote to Rio Tinto Group shareholders for the first time, saying his hostile $148 billion takeover offer would generate ``substantial, additional'' value for investors. ``This unique overlap offers substantial opportunities to save money and add value through managing the assets as one collective group under single ownership,'' Argus wrote in the letter dated today and sent to the Australian stock exchange. European Union antitrust regulators widened a probe of the BHP plan earlier this month saying they have ``serious doubts'' about a combination that would control more than a third of the world's iron ore, the main ingredient in steel. Rio shares sell for 10.4 percent less than BHP's bid, signaling investor concern the biggest mining acquisition may not succeed. ``We expect that various regulatory processes will be completed by the end of 2008 after which we should be in a position to send the offer documents to you,'' Argus said in his letter. BHP's all-scrip offer is 45 percent higher that Rio's share price before it made its initial proposal in November, he said. Rio shares would be ``trading very differently'' without the BHP offer, he said. Rio's shares rose A$2.35, or 2 percent, to A$121.50 at the 4:10 p.m. Sydney time close on the exchange. BHP, the world's largest mining company, gained A$1.01, or 2.6 percent, to A$39.26. More Metals BHP wants to merge with Rio to deliver more metals faster to China, the largest consumer of commodities. Rio Chief Executive Officer Tom Albanese says the second-biggest mining company is worth ``much, much more'' than the offer. The discount between BHP's offer and Rio's share price has widened as world economies slow and stock and commodity markets fade. BHP also faces opposition from steelmakers, including ArcelorMittal, which have already seen iron ore prices rise fivefold since 2001. The takeover would make Melbourne-based BHP the biggest producer of copper, aluminum, and coal burned by power stations. The three commodities have reached records this year. BHP Chief Executive Officer Marius Kloppers said he will deliver $3.7 billion in cost savings and increased sales if it succeeds. ``As shareholders in the merged group, you will be beneficiaries of strong demand, tight supply and high commodity prices,'' Argus wrote.