BHP lines up $70bn package to aid Rio bid

BHP Billiton has lined up a $70 billion (€47.7 billion) financing package to bolster its £67 billion (€95.5 billion) takeover approach for rival miner Rio Tinto, as sources close to its target indicated yesterday the company was open to a takeover at the right price.

Rio rejected the initial offer of three BHP shares for every Rio share that BHP disclosed on Thursday, saying it was too low.

A combination of the two companies would create a $380 billion mining giant that would dominate the iron ore, copper, coal and aluminium markets.

Rio Tinto shares soared for a second day yesterday, climbing 6.2 per cent to £56.24, as the market bet on BHP coming back with a higher bid. Based on Wednesday's closing prices, BHP's approach values Rio's shares at about £52.68.

Market sources said BHP's arrangement of debt facilities through Citigroup pointed to the group getting ready to launch a hostile bid for Rio. BHP declined to comment. A person close to the company said BHP was still trying to get Rio to discuss a friendly deal. A source close to Rio said the company was not closed to the idea of a BHP takeover if the price was appropriate: "There is no natural aggression or antipathy towards BHP, they are business partners in many parts of the world."

The two companies jointly own the Escondida copper mine in Chile and run neighbouring iron ore operations in western Australia. A second person close to Rio said market rumours of rival bids were misguided. "There is no concept of trying to find a white knight."

Rio chief executive Tom Albanese visited China this week, stoking speculation he was courting Chinese investors for a friendly deal to fend off BHP. But the person close to the company said he had arranged his trip before Rio was approached by BHP: "Tom spends a lot of time in China because that's where the customers are."

Analysts said yesterday that any takeover of Rio by BHP would be a lengthy process because of antitrust concerns.

BHP Billiton shares closed down 1.7 per cent at £16.28.