Rio Tinto should not compete with BHP for Anglo American – investor says
Rio Tinto Ltd (ASX: RIO) should not compete with BHP Group Ltd (ASX: BHP) to take over Anglo American plc (LON: AAL), says Daniel Sullivan. He’s a portfolio manager at Janus Henderson Investors.
Why shouldn’t $RIO target Anglo American?
$AAL has already rejected BHP’s $39 billion takeover proposal citing undervaluation as Invezz reported here.
On Friday, the Australian Financial Review said Rio Tinto had considered making an offer to the mining company based out of London, United Kingdom as well.
But $RIO lacks capacity to go up against the world’s largest mining firm by market cap in a bid to acquire Anglo American, as per Daniel Sullivan.
Shares of Rio Tinto are roughly flat while both BHP and $AAL are up meaningfully on Friday.
What should Rio Tinto do instead?
A better alternative for Rio Tinto would be to target smaller producers of lithium and copper, said Daniel Sullivan on Friday. These may include the likes of Pilbara Minerals, Tech Resources, Arcadium Lithium, and Sandfire Resources, he added.
Rio Tinto needs to build a dynamic growth acquisition partnerships model to attract many agreed acquisitions to rapidly diversify their iron ore exposure.
His comment arrives less than a month after $RIO said its copper, aluminum, and bauxite production went up 7.0%, 5.0%, and 11%, respectively in Q1. Pilbara iron ore shipments, however, were down 5.0% in the first quarter.
Wall Street currently has a consensus “overweight” rating on Rio Tinto stock that pays a dividend yield of just over 5.0% at writing.
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