Cash Rich BHP Billiton (BHP) On The Prowl For Mergers
After the proposed mega merger between BHP Billiton (
BHP) and Rio Tinto (
RTP) fell apart (
Nov 8, 2007: Rio Tinto Up ... $103!) , any deal BHP Billiton considers from here will seem "small" by comparison. I am hoping for more of "latch on" acquistions rather than something huge that will weigh on the stock for a period of quarters. There has been some scuttlebutt raised about going after fertilizer assets, specifically potash (which is mined) but as I read about a potential foray into oil & gas that would raise a whole different set of questions.
Via
WSJ
- BHP Billiton, the world's largest miner, has built up about $18 billion in cash during the last year and expects to use some of it, along with additional borrowings, to acquire large rivals, possibly setting in motion a new round of acquisitions in the mining sector.
- BHP, which launched the last major cycle of industry mining mergers when it went after its chief rival, Rio Tinto in 2007 with a $68 billion bid, said it has identified "four or five opportunities", all large mining, oil or gas companies, or assets in those sectors, more likely in mining. It would expect to make a move within the next 12 months.
- "We have no pressure to do it. But I can tell you we have done a lot of work," said BHP's Chief Commercial Officer, Alberto Calderon, who is spearheading the company's acquisitions efforts. "Out of this crisis, we would like to put our balance sheet to work. At some point, you have to put your money where your words are," said Mr. Calderon.
- Mr. Calderon said that BHP has set aside about $10 billion this fiscal year, which began July 1, for development of new projects and expansion of existing ones.
- Mr. Calderon declined to name potential targets but said the company wanted to expand in certain commodities: iron ore, copper, coking coal, petroleum and potash, which is used as fertilizer. (all make sense to core competency)
- BHP wants to move relatively quickly, before the economy picks up more strongly, causing prices to increase and assets to become more expensive.
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