Baosteel may consider massive Rio Tinto bid

SHANGHAI-BASED steel giant Baosteel Group Corp is reportedly considering a US$200-billion-plus bid for international rival Rio Tinto. The figure, raised by the company's chairman, far surpasses an offer for Rio Tinto that has already been made by BHP Billiton.

Baosteel and other Chinese companies are studying a bid for Anglo-Australian firm Rio Tinto and the possibility for it to move forward is "quite big," the 21st Century Business Herald quoted Chairman Xu Lejiang as saying. Although officials at Baosteel's publicity department said they cannot confirm the remarks, a Chinese bid to counter BHP Billiton's takeover proposal has been widely flagged.

Last month, another newspaper said China Investment Corp, the nation's Sovereign Wealth Fund that was set up in late September, was leading a domestic consortium to bid for Rio Tinto. However, that report was denied by China Investment Corp.

Analysts said money wouldn't be a major hurdle if Chinese companies launch a united bid with government backing, despite other barriers, such as possible foreign regulatory opposition.

"Whether a China bid eventually succeeds or not, at least it will make BHP Billiton's bid more difficult," said Jia Liangqun, an analyst at online consultancy Mysteel.

A combination of BHP Billiton and Rio Tinto will create an entity that controls almost half the Asian market for iron ore, possibly leading to even higher ore prices.

The China Iron and Steel Association and mills in other nations have been opposing the proposal.

China needs to import about half of its iron ore to meet its requirements.

BHP Billiton is offering more than US$130 billion for Rio Tinto, which has rejected the proposal as being "far undervalued."

Asked about the price that Chinese companies can offer, Xu was quoted as saying that "US$200 billion may not be enough."

A spokesman for CISA said yesterday he has no information of a takeover bid, but the association, which represents domestic mills, has been closely monitoring the progress of the bidding war for Rio Tinto.

A Bloomberg News report yesterday said Chinese mills and the government are studying a Rio Tinto bid, citing an executive at Shougang Co. But another official at the Beijing-based mill later said his company is not involved in the deal.

Shares in Baosteel's listed unit, Baoshan Iron & Steel Co, jumped 5.22 percent to 15.53 yuan (US$2.10) on the Shanghai Stock Exchange yesterday on the back of the reports. Other steel stocks followed suit.

BHP Billiton's Chief Executive Marius Kloppers visited China late last month as part of an Asian tour aimed at seeking support for the Rio Tinto offer. He told key customers in China, Japan and South Korea that the combined companies will reduce costs and improve efficiency.