There were fresh legs on Rio Tinto stock on Monday afternoon – up more than 2 per cent to £58.65 in an otherwise skittish market, followers having earlier discounted reports that Blackstone was reportedly constructing a Chinese-backed consortium to break the miner up.
Undiscerning New York-based bid arb hedge funds, with limited skills in terms of reading the UK press, pushing the price higher? Perhaps.
More likely it was this headline, as reported by Reuters:
China Baosteel shares suspended on Tuesday
Shanghai’s market authorities did not give any reason for the move, which happened after the close of business in China. It follows a denial, published in the Shanghai Securities News on Thursday, by Baosteel chairman Xu Lejiang, saying earlier reports of him suggesting his company was looking at a disruptive counterbid for Rio were a “fabrication of the media.”
This was backed up by a statement on the company’s website, saying:
The Baosteel group believes that (media) reports that Baosteel plans to buy Rio Tinto are untrue…
Baosteel believes the launching of BHP Billiton’s plan to buy Rio Tinto is likely to have huge implications for the world’s steel and non-ferrous metal industries. Due to this Baosteel is watching this closely and will continue to watch and comment on this matter as it develops.”
There is a precedent here. Back in October, despite numerous earlier statements to the contrary, a sudden suspension of Citic Securities in Shanghai was followed by news that the firm had indeed struck a landmark deal to invest $1bn in America’s Bear Stearns.
Then again, maybe the tale of Blackstone’s interest is actually true.
What’s more, whatever China’s interest, pressure is building for BHP Billiton, whose proposals remain at an indicative stage, to either ‘put up or shut up.’ According to the FT’s Rebecca Bream, Rio will this week ask the UK’s takeover panel to tell BHP to either make a formal takeover bid in the next month or walk away.