Australian mining giants Rio Tinto and BHP Billiton have scrapped plans to join forces in the iron ore producing Pilbara region of Western Australia, citing regulatory roadblocks.Both parties had been advised that the proposal would not be approved in its
Australian mining giants Rio Tinto and BHP Billiton have scrapped plans to join forces in the iron ore producing Pilbara region of Western Australia, citing regulatory roadblocks.
Both parties had been advised that the proposal would not be approved in its current form by the European Commission, the Australian Competition and Consumer Commission, the Japan Fair Trade Commission, the Korea Fair Trade Commission or the German Federal Cartel Office.
Some regulators indicated that they would require substantial remedies that would have been unacceptable to both parties, including divestments, BHP and Rio said. Others said they would be likely to prohibit the transaction outright, the companies said in a joint statement.
They synergistic benefits of the deal were estimated to be worth $US10 billion.
The news follows months of speculation that the deal would fall through, due in no small part to the international competition issues that it raised.
If it had gone ahead, BHP and Rio would have created a virtual duopoly in the world’s seaborne iron ore market, with the joint venture having just one other significant competitor -- Brazil’s Vale.
Some analysts questioned the 50/50 joint venture’s value, saying it favoured BHP more than Rio, because Rio has a bigger presence in the ore-rich Pilbara.
The parties mutually agreed that no break fee is payable.
Rio Tinto chief execuive Tom Albanese said the full value of the synergies on offer from a joint venture was “a prize well worth pursuing”.
“Both companies have worked hard together over the last 16 months in a positive spirit to demonstrate its pro-competitive effects and I am disappointed that ultimately the regulators did not agree with us,” he said in a statement.
