BHP Billiton intervention set to spark WMC bidding war

A bidding war looks set to break out over WMC Resources, the Australian mining group facing a hostile bid from Xstrata, after it emerged the London-listed group's rival BHP Billiton is seeking to buy a 10 per cent stake in WMC.

The late intervention by the mining giant BHP surprised the markets yesterday, as the company was apparently willing to pay a 12 per cent premium for WMC shares, compared with the Xstrata offer.

Xstrata tried unsuccessfully for months to court WMC but, after failing to convince WMC's board, launched an A$8.2bn (£3.4bn) bid anyway that investors have until 24 March to accept. Following intense speculation about BHP's interest in Australia, the company yesterday confirmed reports it had appointed Deutsche Bank "to assess the feasibility of acquiring a stake in WMC Resources".

It is understood that BHP, jointly listed in the UK and Australia, is looking to buy a stake of just more than 10 per cent - enough to frustrate Xstrata's takeover. It was the price that BHP was willing to pay for the shares - A$7.85, compared with the A$7.00 offer price from Xstrata - that really shocked industry figures. If BHP made a full offer at that price, it would be paying A$1bn more than Xstrata was willing to spend. Few believe BHP merely wishes to block Xstrata, speculating that it wants to either mount a counter-bid or gain access to WMC's most important asset, Olympic Dam, which contains more than one-third of known deposits of uranium.

Increasingly bullish predictions of a renaissance for nuclear energy has convinced BHP that it must gain exposure to uranium. Soaring global energy demands, particularly from the Chinese, together with concern over the environmental fallout from burning fossil fuels, have meant that zero-emission nuclear power is gaining popularity. The Chinese alone plan to build 30 nuclear power stations by 2020.