China's Mysteel Research Institute (MRI) stated in a report that BHP Billiton and Rio Tinto are very likely to realize their merger in six months to a year because those against their merger come from less important industries, thus they fail to exert any substantial influence to stop the deal. Rio Tinto opposes the merger because they want a higher price, but from a strategic point of view they welcome the merger. BHP Billion has to pay a much higher price to acquire Rio Tinto, at least 40 percent higher than the present offer.
MRI also believed that the merger will do more harm than good to China. The merger of the two mining giants will surely strengthen their price control capacity and enable them to gain a bigger say in bargaining with China. However, the merger will surely increase production efficiency, thus guaranteeing an iron ore supply for China in the short term.
MRI suggested that the Chinese government and enterprises pay close attention to further developments. One Chinese enterprise or a joint group of several steel companies are less likely to make a bid for Rio Tinto unless supported by the government. But other countries would not find this acceptable. China may use various strategies to force BHP Billiton to raise its offer, or actively participate in the merger or other mergers.
For more details, please read the full story in Chinese. (http://paper.cnstock.com/newcjzh/headine/2007-12/14/content_2849240.htm)
(China.org.cn December 14, 2007)