The year to date has seen global mergers or acquisitions worth $236bn – the lowest total announced since late 2004, noted the FT. But while the credit squeeze depressed M&A in January, the mood has brightened this month.
February opened with Microsoft’s unsolicited $43bn bid for Yahoo and reports of a potential $90bn bid by Brazil’s Vale for Anglo-Swiss miner Xstrata. China’s state-owned metals group Chinalco, along with US partner Alcoa, stumped up $14bn for a 9% stake in Rio Tinto – which has received, and rebuffed, an improved offer of $150bn from rival BHP Billiton.
What’s behind the deals
Microsoft and Yahoo are both hard hit by competition from Google, which is streets ahead when it comes to internet searches, said Michael S Malone in The Wall Street Journal. The former is big, rich but “increasingly toothless” and Yahoo is “stuck to an obsolete business plan”.
But the sum of “two also-rans” almost never proves a winner. The significance of the Rio tussle, meanwhile, extends beyond mining, noted the BBC’s business editor Robert Peston. It marks “the most aggressive intervention in a Western commercial deal” ever made by China.
What next
BHP CEO Marius Kloppers gives the impression that Chinalco is “just another, albeit quite large, shareholder to win over,” said Jeremy Warner in The Independent. It clearly isn’t – as key customers of both miners, the Chinese are “determined to scupper BHP’s ambitions”, which they see as “essentially monopolistic”.
Chinalco doesn’t have a blocking stake in Rio, but it could make life difficult, agreed Nils Pratley in The Guardian. The “political argy-bargy” has barely started. Given all this, BHP’s improved but hardly “knock-out” price makes sense. It should keep Rio’s share price “on the boil”, making it harder for the Chinese to increase their stake unless they choose to pay “wacky prices”.
BLT: 12m change 62%
RIO: 12m change 101%