Rio defends bid rejection, BHP talks up its strength

BHP Billiton and Rio Tinto both delivered letters to shareholders today, with BHP's hostile bid for its rival the focus of the updates. In its letter to shareholders, BHP chairman Don Argus said the company's recent results highlight the strength of its diversified portfolio of assets in a world that is seeing continuing growth in demand for natural resources. “The combination of BHP Billiton and Rio Tinto would enhance the ability to supply those natural resources to customers and create an organisation without comparison in the natural resources industry in terms of strategy, asset mix and quality, and culture,” he said. “Your board believes the combination of BHP Billiton and Rio Tinto will benefit the shareholders of both companies.” Mr Argus said BHP still expects the regulatory review of the bid to be completed by the end of 2008 and it will send out formal offer documents and call an extraordinary general meeting of BHP shareholders once the preconditions for its bid are met or waived. Takeover target Rio Tinto reiterated its rejection of the $US160 billion bid, saying its growth prospects are better than those of its rival. "Rio Tinto's momentum and growth prospects are superior to those of BHP Billiton out to 2015," Rio Tinto chairman Paul Skinner said in his letter to shareholders. Mr Skinner said there was no change to Rio's rejection in February of BHP's offer of 3.4 of its shares for each Rio Tinto share, which he said significantly undervalues the company and its prospects. "The outlook for the company has improved further since that time," he said. Mr Skinner said BHP needs approval from the European Commission for its bid and hasn't yet made a formal offer, only announcing it plans to do so if a number of preconditions are met. "These preconditions could take many months to satisfy and may not even occur," he said. Rio Tinto said demand for its key products is at unprecedented levels, being driven primarily by rapid growth in China and other developing countries, and that demand for these key products could double over the next 15 years. －－Dow Jones Newswires