Aussie Brokerage Firm Still Sees BHP Takeover Of Woodside

Australia's Southern Cross Equities still thinks BHP Billiton (NYSE: BHP), the world's largest mining company, wants to acquire Woodside Petroleum, Australia's second-largest oil and natural gas producer, an acquisition that several other investment banks have voiced doubt over in recent days.

Southern Cross, which has accurately predicted previous takeovers in Australia's mining and energy sectors, said there is circumstantial evidence in the market that indicates BHP may be readying to make a move on Woodside. Some of that evidence may include Royal Dutch Shell's (NYSE: RDS-A) decision to proceed with its sale of its 24% stake in Woodside.

That move has prompted a rally in Woodside shares and renewed speculation that BHP would acquire the company. Southern Cross said BHP could offer $50 billion for Woodside, creating the largest takeover in Australian history, according to the Australian newspaper.

Speculation has swirled that Barclays Capital, BHP's corporate broker in London and adviser on its recent Chesapeake Energy (NYSE: CHK) deal, is advising BHP on the potential deal, the Australian reported.

Earlier this year, BHP said it would eschew big acquisitions to focus on making $80 billion in investments over the next several years to bolster and develop and its own assets. Some analysts have speculated that any near-term acquisitions by BHP would be more in line with the company's recent $4.75 billion purchase of shale-gas assets from Chesapeake, not mega-deals.

Citigroup and Goldman Sachs have been among the banks that have recently voiced doubt over BHP moving on Woodside, but Southern Cross notes Woodside is the only big acquisition target currently available to the Anglo-Australian mining giant. Citi says Woodside is currently too expensive and the cost benefits are too low to motivate BHP to acquire the firm.

BHP's failure to get big deals done is worth noting in this situation as some industry observers have said there is pressure on CEO Marius Kloppers to get a big deal done. In recent years, BHP has failed in mega bids for rival Rio Tinto (NYSE: RIO), the world's second-largest mining company, and Potash Corp. of Saskatchewan (NYSE: POT), the world's largest fertilizer producer.