COMMENTATORS love coining names for big days in business — Black Wednesday, Terrible Tuesday, that kind of thing. Last week we had Frantic Friday. It was as big a day in business as I can recall. Microsoft made a $44 billion (£22 billion) grab for Yahoo, a stunning gambit that will mark a milestone in the development of Bill Gates’s behemoth, and may change the face of the internet by creating a genuine rival to Google.

The boldness of the approach was enough — in the short term — to dispel the recessionary fears that have gripped stock markets in recent weeks, shoring up the Dow Jones index in the face of continued and justified worries about a financial services meltdown and American recession. In Britain a smaller takeover approach, from an unnamed suitor for the engineering group FKI, helped push the FTSE 100 back above 6,000.

As this column has been saying, market panic has made companies like FKI — and Invensys for that matter — a bargain, and the 40% rise in its share price on Friday puts some analysts to shame.

But Friday will really be remembered as the day aluminium group Chinalco — in effect an arm of the Chinese government — made a dawn raid on Rio Tinto, paying (in concert with American aluminium group Alcoa) £7.2 billion for a 12% stake.

It came just days before BHP Billiton, the world’s largest mining company, was expected to table an offer for Rio in what would be one of the biggest takeovers in history. The BHP-Rio deal worries the Chinese. It would create a mining superpower with strong positions in aluminium, nickel, copper, uranium and iron ore — all the raw materials Beijing needs to keep its economy growing. The merged company would, despite dual-listed status, be an Australian champion in the resources sector.

China decided not to leave such important matters to chance, and used its firepower to give BHP a punch on the nose. There could be more to come.

As we report today, China Investment Corporation, Beijing’s sovereign wealth fund, has put $120 billion at the raider’s disposal should it decide to make a full bid.

In the short-term the focus will be on BHP. This weekend Don Argus, chairman, and Marius Kloppers, chief executive, must decide what to do next. Time is tight. They have until Wednesday to bid. As things stand, it would have to be a hostile offer, as there is no agreement on terms with the Rio board. There is unlikely to be one unless BHP increases its offer substantially.

To take a wider view, the scrabble for resources companies has become — as George Orwell said of sport — war minus the shooting. China needs iron ore, copper and all the other goodies at Rio’s disposal if it is to continue its economic miracle. Political niceties have to be swept aside. This is now China versus Australia, and it is uncertain who will come up trumps. The Australians must be hoping China doesn’t develop a taste for cricket.

Swann upping

THE stock market’s response to WH Smith’s announcement of a share buyback and special dividend looks churlish.

The company, whose fortunes have so improved under the vigorous leadership of chief executive Kate Swann, said last week that in the past few months, underlying sales through its high-street shops were down 3% — a surprise to no-one. But margins appear to be growing, reflecting the company’s success in stripping out costs. And at the company’s travel business, running shops at railway stations, airports, motorway service stations and the like, both sales and margins are expanding.

Far more important, however, is WH Smith’s new appetite for tightening up its balance sheet — signalled in these pages last month and confirmed last week. The company is handing out £60m through a special dividend and a further £30m by buying back shares over the coming year.

Do a bit of simple arithmetic. Earnings per share of 32p for the year to August is within easy grasp. For the following 12 months, the figure should comfortably top 36p. Yet still the shares were changing hands for less than 360p on Friday night. That alone makes the stock look cheap. But there is a far more compelling reason to say its shares are cheap.

WH Smith’s travel business is an attractive property. Ferrovial has received bids for its World Duty Free that value it at more than 13 times cashflow before interest and tax. Imagine WH Smith Travel on an equivalent multiple of 10 times if a trade buyer got interested. That would value the business at more than £400m. And therefore the rest of WH Smith — the high street retail side — is implicitly worth just twice the cashflow it generates.

My new friend Bill

THE Bill Gates circus came to London last week and, as we report on the opposite page, I was lucky enough to have the only one-to-one interview with him. The first question people ask is what is he like. Well, he may be the world’s richest man — but he’s normal. He drinks Coke, when he is impatient he jigs his legs, he uses his arms and hands a lot and he smiles. Bill is intense but he has a sense of humour. That is what came across; his skills in the software department may class him as a geek, but he is also a leader of men.

He commands respect and after 45 minutes with him you start to understand exactly why Microsoft was not built by mistake. Neither does he want his company to his lose its place in the market and that is what the move on Yahoo underlines. Bill does not like coming second to anybody.

Carr smart

ROGER CARR, chairman of Mitchells & Butlers, was right not to play to the gallery last week and sack his chief executive Tim Clarke following a bungled hedge that cost it a breathtaking £274m.

Even with its shares at 450Äp, the pub group has outperformed both the FTSE 100 and the All-Share indexes by some distance since it demerged from Six Continents. It has also returned over £1 billion. Sacking the board when the company is being courted by several bidders is not a smart move. This company is still worth 600p, considerably higher than Friday’s closing price. If a buyer does not materialise, investors will not give it a second chance and that is not lost on Carr.

john.waples@sunday-times.co.uk

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