Will BHP Billiton Limited’s South32 be a takeover target?

After its failure to merge with Rio Tinto Limited (ASX:RIO), will Glencore Xstrata turn its attention towards BHP Billiton Limited’s (ASX:BHP) spinoff?

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The same analyst who revealed Glencore Xstrata’s ambition to merge with Rio Tinto Limited (ASX: RIO) last year has stated that the mining giant could instead turn its attention towards South32, the proposed spinoff from BHP Billiton Limited (ASX: BHP).

BHP Billiton has proposed a $15 billion spinoff of assets which would include silver, aluminium, manganese, lead, nickel and some coal operations. This would allow the miner to focus on its core operations. While the spinoff is still not certain to go ahead (it will go to vote in May), BHP Billiton said in its first-half operational review on Wednesday that it still believed the demerger would support further operating performance across all divisions.

As reported by The Australian Financial Review, Paul Gait, a senior mining analyst at Bernstein, has said that the theory is speculative but that it would make sense given the history of Ivan Glasenberg, Glencore’s CEO. While a merger with Rio Tinto could prove too difficult, Glasenberg has in the past expressed interest in some of the individual assets that would come bundled with South32, meaning that he could try to snap up the new entity in its early life.

In fact, Gait believes the $15 billion South32 could become Glasenberg’s latest takeover target within just three months of the demerger, particularly if the shares gave up ground in that time.

The AFR also quoted Jason Beddow, chief of BHP’s top-20 shareholder Argo Investments, as saying, “It’s in Glencore’s DNA, if they like the look of something of course they’ll have a go at it.” Given the recent decline in commodity prices, Glasenberg could certainly see it as an opportunity to make a strategic move.

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