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After months of back and forth on a deal, talks between Brazil's Cia. Vale do Rio Doce, the world's top iron ore extractor, and Anglo-Swiss peer Xstrata plc on a deal worth $90 billion fell apart March 25.
It wasn't long after that the blame game began. Vale contended Glencore International AG, a 34.5% Xstrata shareholder, wanted an accord for trading commodities, chief executive Roger Agnelli told reporters, while The Deal's Paul Whitfield noted that the price may have been too low as Vale shares were dipping and a stock component was a substantial part of the offer. Vale on Feb. 22 was reportedly willing to increase its offer to 45.4 billion pounds ($90 billion), according to Brazilian newspaper O Estado de S. Paulo. And Glencore at the time looked poised to stand in the way. On Jan. 22, Vale said it was interested in pursuing Xstrata, weeks after the target was itself rebuffed by Australia's Resource Pacific Holdings Ltd. for the second time in a month. Xstrata eventually reeled in Resource Pacific on March 5 in a deal valued at $973 million. The news came two days after Australia's Oxiana Ltd. and Zinifex Ltd., revealed a $5.8 billion deal March 3. The same day, Russian miner Mechel said it was weighing a bid for London-based chrome and nickel miner Oriel Resources plc. And rounding out February, Gryphon Gold Corp. and American Bonanza Gold Corp. stepped back from a merger agreement just weeks after it was announced. CIRCLING Meanwhile, Rio Tinto plc still won't give in to mining giant BHP Billiton Ltd. and on Feb. 6 rejected its latest, sweetened, $147 billion bid. BHP, which secured a $55 billion financing package for the deal (thought to be the largest ever), chased its target for three months before finally upping its offer earlier Feb. 7. Xstrata's decision to put itself on the block stemmed partly from the BHP-Rio activity, Whitfield noted. Another suitor may be Anglo American plc. The February news followed several big developments in the industry:
NERVES OF STEEL But back to BHP-Rio Tinto. The sweetened offer came days after Aluminum Corp. of China Ltd. and Alcoa Inc. unveiled plans to pay $14 billion for a 12% stake in Rio Tinto, complicating matters for BHP. The offer comes after Rio Tinto rejected BHP in November and outlined plans for a standalone future. The Deal's Paul Whitfield noted:
Thomas Albanese, the company's CEO denied rumors Rio Tinto could launch a counteroffer. Further, the company promised to triple its iron ore output, planned expansion of its copper business and said it would increase its 2007 dividend by 30% and for the two years to follow, by 20%. As of the end of November, BHP shares had dipped nearly 10% since its offer was made public. BHP was still expected to pursue a merger with its smaller rival o create a miner worth $322 billion -- a deal that would create the world's largest mining company, by far -- despite the target's initial rejection of the advance. And BHP, it was thought, might put some cash on the table to get it done. It could set off a flurry of M&A activity. Buzz about a Chinese investor possibly coming in surfaced in December. An executive from a Chinese steelmaker reportedly said a $200 billion bid was in the works, something at least one executive, Baosteel Iron & Steel Co chairman Xu Lejiang, dismissed as fabrication, The Deal's Giles Parkinson pointed out.
Indeed, all of the above companies made subsequent moves in December and January, building on 2007's dealmaking flurry. (See a recap of recent M&A activity below.) As the contest for the world's largest mining dea Categories Deal Video
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