TEXT OF STORY
Doug Krizner: Shares in the world’s largest miner, BHP Billiton, are down sharply in London this morning. The company’s profit fell for the first time in more than five years.
But a bigger concern is BHP raising its bid to buy rival Rio Tinto — that offer is now $147 billion. BHP may have had no choice, especially since China’s taken an interest in Rio. Marketplace’s Scott Tong reports from Shanghai.
Scott Tong: BHP Billiton has courted Rio Tinto for months. In November, it offered 13 percent less than today, to which Rio said: “Come back with a real diamond.”
Today’s sweetened offer may spark serious talks. BHP says a deal brings economies of scale and efficiencies — more minerals to market faster.
But buyers like China fear a supplier gang-up: monopoly pricing. Industry consultant Michael Kamesaroff:
Michael Kamesaroff: The Chinese are smarting under the fact that iron ore prices have doubled over the last couple years. They’re probably annoyed at it, in the same way you and I are annoyed every time we pull up at the petrol pump and see the price of fuel.
Last week, Chinese state-owned Chinalco bought a $13-billion stake in Rio, the largest Chinese acquisition to date.
Some think Chinalco wants to scuttle the deal. Others say it’s simply bought a seat at the table, just in time for the talks to begin.
In Shanghai, I’m Scott Tong for Marketplace.
Marketplace is on a mission.
We believe Main Street matters as much as Wall Street, economic news is made relevant and real through human stories, and a touch of humor helps enliven topics you might typically find…well, dull.
Through the signature style that only Marketplace can deliver, we’re on a mission to raise the economic intelligence of the country—but we don’t do it alone. We count on listeners and readers like you to keep this public service free and accessible to all. Will you become a partner in our mission today?