BHP, Rio scrap proposed iron-ore JV
By Sonali Paul |
October 19, 2010, Tuesday
|
Print Edition
Print Edition
BHP Billiton and Rio Tinto yesterday scrapped a proposed US$116 billion iron-ore joint venture as expected, caving in to opposition from regulators, steel makers and major investors 16 months after unveiling the plan.
The collapse of the deal marks top global miner BHP's second failed attempt to grab a piece of Rio Tinto's superior iron ore assets in three years and puts its focus squarely on a US$39 billion hostile bid for the world's biggest fertilizer maker, Potash Corp.
Rio and BHP, the world's second and third-largest iron ore miners, had touted the deal to combine operations in Western Australia, arguing it would have reaped more than US$10 billion in savings.
"The failure of the joint venture will be slightly more positive for Rio than BHP, but it's important to remember it's actually a negative for both companies," said Ben Lyons, an analyst at ATI Asset Management.
The two companies could pursue moves to share infrastructure and blend iron ore in Western Australia, under a recent agreement with the state government, which would yield at least half of the savings prized in the joint venture plan. But it is not a given.
BHP and Rio would have to review regulators' objections to their joint venture to gauge whether any other collaboration would be allowed before going ahead with what analysts have called Plan B, a person close to the process said.
The decision to call off the deal was widely expected after European regulators indicated they would block the deal.
"The full value of the synergies on offer from a 50:50 joint venture was a prize well worth pursuing," Rio Tinto Chief Executive Tom Albanese said in a statement yesterday.
"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," Albanese added.
The collapse of the deal marks top global miner BHP's second failed attempt to grab a piece of Rio Tinto's superior iron ore assets in three years and puts its focus squarely on a US$39 billion hostile bid for the world's biggest fertilizer maker, Potash Corp.
Rio and BHP, the world's second and third-largest iron ore miners, had touted the deal to combine operations in Western Australia, arguing it would have reaped more than US$10 billion in savings.
"The failure of the joint venture will be slightly more positive for Rio than BHP, but it's important to remember it's actually a negative for both companies," said Ben Lyons, an analyst at ATI Asset Management.
The two companies could pursue moves to share infrastructure and blend iron ore in Western Australia, under a recent agreement with the state government, which would yield at least half of the savings prized in the joint venture plan. But it is not a given.
BHP and Rio would have to review regulators' objections to their joint venture to gauge whether any other collaboration would be allowed before going ahead with what analysts have called Plan B, a person close to the process said.
The decision to call off the deal was widely expected after European regulators indicated they would block the deal.
"The full value of the synergies on offer from a 50:50 joint venture was a prize well worth pursuing," Rio Tinto Chief Executive Tom Albanese said in a statement yesterday.
"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," Albanese added.
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