Australian investors are trying to sort out what’s going on between BHP and RIO.
Time to look at some reader mail.
“In reading all the articles about the BHP bid for Rio Tinto, I keep wondering why no one cites Kloppers’ disastrous strategy?
“While he was attempting to clever and ‘coy,’ and underbidding on Rio Tinto, he allowed time for the Chinese to come in and frustrate the effort. He was playing chess while he should have gone for a decisive smash play – much like Albanese did for Alcan.
In fact, I think the Rio Tinto CEO has played a far smarter game so far and if the merger goes through, I would select him as the surviving executive though I doubt that would happen.”
It’s a full mail bag today.
You suggest investors are at property auctions in today’s newsletter. Why would you bid at a property auction when good value customer and profit growth shares are to be had? I keep an eye on residential property, and the yields are the lowest I have ever seen. Renters don’t look as though they will be able to pay more in the next few years to me. Property is a strange beast. I wonder what the trend in average time between listing and sale has been for the last couple of years in the investment segment of the market.
Now for some simple questions. Can you please explain how RIO will benefit RIO’s shareholders by continuing to drive the price of both BHP and the lockstepped RIO shares down?
Can you speculate on what BHP/RIO shares would be worth now if RIO had accepted the first scrip for scrip offer, when the scrip price ratio pre offer was actually as good as or better than the latest offer?
Please explain how the RIO directors’ strategy to date benefited RIO’s general shareholders? Some of RIO’s major investors took the money, and ran. They did OK, but some observers perceive that the new player has the ability to block a fully beneficial clean merger, and has a natural interest in keeping prices from (both) BHP AND RIO low as well.
Since the Chinese have got their blocking stake, and potentially a seat or two on RIO’s board, what will RIO shares be worth the morning after the night before if BHP withdraws its offer? Doesn’t the likelihood of an FIRB barrier make BHP the only takeover game in town?
And here is a complicated question. What will Twiggy in the middle Fortescue be worth when (and if) BHP and RIO are combined.
Are we having fun yet?
Yes. We are having fun. While the big boys duke it out, we believe the lower-grade ores in the mid-West become more economically viable day-by-day. There are more than two big stocks to pick from as well.
Love the daily read. Simple question really. Does Gold Bullion have a Silver counterpart, and if so, is it worth an investment given Silver is doing so well?
The Daily Reckoning Australia