Support for BHP Billiton bid on Rio Tinto

ANGRY shareholders are urging BHP Billiton to launch a second takeover tilt at Rio Tinto in an effort to scuttle the miner's deeply unpopular $US19.5 billion ($29 billion) deal with Chinalco, according to UK media reports. London's Sunday Telegraph reported yesterday that top institutional investors had promised to support BHP if the miner undertook a share issue to raise funds for a renewed offer. BHP abandoned its initial $US66 billion hostile bid for Rio last year due to concerns about the miner's $US38.7 billion debt pile from its top-of-the-market acquisition of Canadian aluminium producer Alcan. Rio, which repeatedly rebuffed BHP's approach as too low, then sought an alternative solution to its financial woes through a deal with the Chinese government-backed Chinalco. "We have made it clear that a new bid from BHP, either as a whole or for some of the assets, would be preferable to a deal with China," the newspaper quoted one top UK investor as saying. "Given that the level of Rio's debt is one of the biggest barriers, we have made it clear we will address the problem with a rights issue." The debt bail-out, unveiled last week, hands Chinalco up to 18 per cent of the Rio group as well as a swathe of the miner's copper, aluminium and iron ore assets. The agreement has incensed many Rio shareholders because it bypasses their first right of refusal when a company issues new shares and sells off stakes in some of the miner's prize assets in the midst of a commodities downturn. BHP had made fresh overtures to Rio in recent months to discuss various deals but was turned away every time, the newspaper report said. Elsewhere, London's Sunday Times reported Rio shareholders had started spruiking a "mega-rights issue" around UK financial circles to help reduce the miner's massive borrowings without relying on Chinalco's aid. In other developments, a Japanese consortium purchased a 20 per cent stake in Canadian uranium producer Uranium One on Friday. The news follows reports revealing that Rio is talking to several Japanese energy companies on a potential sale of its 68 per cent stake in Energy Resources Australia. And it comes after Japanese conglomerates scooped up stakes in two major Australian uranium developments last year. Mitsui paid $104 million to Canada's Uranium One for a 49 per cent stake in the Honeymoon project in South Australia in October. And Mitsubishi teamed up with another Canadian uranium producer, Cameco, to acquire the Kintyre uranium deposit in Western Australia from Rio for $US495 million ($740 million) in July.