BHP Billiton, Rio Tinto set to create mining superpower

BHP Billiton Ltd. renewed its offer to buy the miner Rio Tinto after the latter had rejected the formers’ all share deal stating that it significantly undervalued Rio Tinto. If the present bid materializes, it could be the biggest acquisition in history.

Hans Kunnen of Colonial First State Global Asset Management said, "If BHP is confident enough about the macroeconomic outlook to do this, then it tells me they've got a positive view for commodities over the next five years. The outlook is positive for resources stocks."

Rio Tinto formerly known as CRA and founded in 1873 is the world's third-largest miner. On the other hand, BHP Billiton is the world's largest mining company. Its origin is in the 2001 merger of Australia's Broken Hill Proprietary Company and the UK's Billiton.

Meanwhile, big investment banks like Goldman Sachs, Rothschild and JP Morgan are doing the number crunching for this $140 billion deal. The deal would surpass the $101 billion takeover of Dutch bank ABN AMRO Holding by a consortium led by RBS, which is thus far the biggest deal of the year so far.

One investment banker said, "A lot of banks in town are getting a gig on it in some way. It's going to be busy for some time though, that's for sure."

If the merger goes through, a behemoth would be created that has the reins of more than a third of the world's iron-ore market, manufactures majority of the coal for power plants, and supplies most copper. The resultant company will owns mines and oilfields on six continents.

Rio Tinto rose a record high of A$17.50, or 15 percent, to A$130.90. Meanwhile BHP dropped 99 cents, or 2.3 percent, to A$42.25. The takeover speculation prompted gains in other mining stocks also. The number of Rio shares traded today was more than three times the stock's daily average over the past six months