Pity Li Qingyu, the poor Chinese journalist who thought he’d got on-the-record, from-the-chairman’s mouth, confirmation that local steel group Baosteel was going to gatecrash the Rio/BHP merger fest.
In fact, let’s start praying for him.
A report this week in the 21st Century Business Herald – a small but respected Shanghai newspaper – said Baosteel, China’s biggest steel group, was planning to top BHP Billiton’s $125bn all paper offer for Rio Tinto with a $200bn bid of its own.
“We are considering it, and the chance of putting forward a bid is high,” the paper quoted Baosteel Chairman Xu Lejiang as saying.
On Thursday a fresh interview with Xu appeared, this time in the official China Securities Journal and the Shanghai Securities News.
“I did not say this. It is a fabrication of the media,” Xu told the Shanghai Securities News, adding that the company lacks the financial muscle.
Which is quite extraordinary – a Chinese journalist, on a well-regarded paper, making up quotes from one of Shanghai’s top businessmen about a $200bn foreign bid. Is he mad?
Yet here is what one well-informed observer in Shanghai told FT Alphaville on Thursday:
On a newspaper like the FT, it might be a sacking offence to make up quotes from a leading businessman about a potential bid. In China, it’s at least a jailing offence. It’s basically virtually impossible the journalist would have made up the quotes
The journalist in question, Li, has dropped from sight. So all we can suggest is that perhaps there is some truth to the rumours now doing the rounds in Shanghai business circles, that Xu made some boastful comments after a long, jolly evening – and regretted it, rather a long time later.The FT, meanwhile, in a Thursday news analysis of Chinese responses to the BHP bid, says that while Baosteel has prompted a wave of speculation about a possible Chinese takeover bid for Rio Tinto, the issue gaining more attention is whether China could acquire a blocking stake in the mining group.
Although there have been top-level discussions in China among officials and companies about how to respond to BHP’s takeover plan, the prospect of a counter-bid by either Baosteel or a consortium of companies is considered unlikely, the FT notes.
The size of the bid would be much larger than anything contemplated before by a Chinese company, the management challenge would be daunting and the risk of a political backlash in Australia considerable.
One banker who was approached by Chinese groups for advice told the FT: “China Inc has the money to acquire Rio but no single company alone is big enough to do that sort of deal. It would require a concert of several like-minded companies and co-ordinating that is probably impossible.”
As a result, Chinese officials and steel groups are believed to be paying closer consideration to the idea of acquiring a blocking stake.
Some bankers have suggested that by buying only a 10 per cent stake in Rio, Chinese groups might be able to thwart any BHP attempt to acquire Rio and then de-list it from the exchanges in London and Sydney — a process that could require 90 per cent investor acceptances.
That, however, is unlikely to be a follow-up story in the 21st Century Business Herald.