Mining giants Rio Tinto and BHP Billiton on Monday abandoned their controversial merger of iron ore extraction operations in Australia following complaints from regulators and key customers, including China, about the risk of violating fair market competition.
The two British-Australian companies, among the three largest mining firms in the world, stated that they were disappointed by the collapse of the $116 billion deal, which aimed to save $10 billion through cost-sharing. “Due to the significant synergies that would arise from merging our iron ore extraction operations in Western Australia with those of Rio Tinto, we did not want to abandon our efforts to secure the necessary regulatory approvals,” said BHP Billiton CEO Marius Kloppers. “However, we realized that the transaction would not receive the necessary approvals to allow the agreement to be concluded, so both parties reluctantly agreed to suspend negotiations,” he added.
The merger was blocked by the European Commission, Australia, Japan, South Korea, and Germany, as well as the world’s largest consumer of iron ore, China, Rio Tinto stated. The planned merger followed BHP’s failed $147 billion bid for a hostile takeover of Rio Tinto in November 2008, at the onset of the global financial crisis. A joint venture in the Australian Pilbara region, a leading source of iron ore for Asian steel mills, was announced during the crisis in June 2009, after Rio was pressured by debts related to the acquisition of the Canadian aluminum producer Alcan. BHP is currently attempting to realize a hostile takeover of Canadian fertilizer producer Potash for $40 billion, which also concerns China, the leading importer of fertilizers. (H)
