Is a BHP Billiton-Rio Tinto Merger Good for Shareholders?

3/21 - "Already the world’s biggest mining and petroleum company with a market cap in the $180-billion range,, Australia’s BHP would be better off on its own, says Tony Robson of BMO Capital Markets. He initiated coverage of the company with an “outperform” rating and a target of A$45 on Wednesday, but insisted that BHP is overpriced when compared to its peers and may fall if its takeover bid fails."

"While prospects for wealth destruction remain, given the possibility of a higher bid for Rio, BHP shares are nonetheless attractive, Mr. Robson said in a report. He estimates the merged entity will make $33-billion in net profit in 2008/2009, and said BHP’s balance sheet will become stronger in the long-term, positioning the company for future “predatory actions” or a return of cash to shareholders."

"But BHP’s bid is destructive in terms of net present value [NPV] ...