It makes sense all the sense in the world that China, broadly defined, should
make a bid for Rio Tinto. If it doesn’t, there’s a very good chance that the
BHP-Rio merger will go through – a merger which would be unambiguously
bad for Chinese iron-ore importers. Given that China’s sovereign-wealth fund
seems unlikely to make a bid, a strategic bid from China’s private sector has
to be a strong possibility.
Helen Yuan says that a number of Chinese steelmakers are interested, although
one in particular, Shougang, has repudiated
the story. And a Reuters
report saying that Baosteel might pay as much as $200 billion for Rio Tinto
has been "taken with a grain of rice," according to the WSJ’s Chris
Kaufman.
I can’t remember any Chinese company getting into a bidding war in the international
M&A arena, but it’s inevitable that sooner or later that will happen. And
Rio Tinto is a big enough prize that it might just be the company to make such
an aggressive bid worthwhile.
One big unknown: How the new left-leaning Australian government would react
to such a bid. The new prime minister, Kevin Rudd, is famously fluent in Mandarin.
But that doesn’t make him more or less likely to object to a Chinese takeover
of a large swathe of Australia’s natural resources.