BHP Billiton and Rio Tinto deal would be bonanza for bankers – by James Thomson (Australian Financial Review – January 4, 2016)

There should be no shortage of buying and selling in the resources sector in 2016. Many of the world’s biggest miners have been forced to put assets up for sale as they desperately try to protect their balance sheets from falling commodity prices.

But these deals are hardly the stuff of dreams. Rather, they are yet more symbols that the mining boom has become a game of survival.

However, there is one deal that would set the market alight and that bankers would love. While a merger between industry titans BHP Billiton and Rio Tinto is incredibly unlikely, it just might make some sense given industry conditions.

We’ve been here before, of course. In February 2008, after more than a year of fencing between then BHP chairman Don Argus and his counterpart at Rio Paul Skinner, BHP launched a hostile takeover bid. Under the $US140 billion deal BHP would have offered 3.4 of its shares for every Rio share.

The takeover battle raged for 10 months until BHP withdrew its bid.

By late 2008, Lehman Brothers had collapsed, the world was in the grips of the global financial crisis and China had experienced a sudden slowdown, causing the spot price of iron ore to fall to $US60 a tonne, from an earlier peak of $US197.

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