BHP, Rio scrap $116 billion iron ore joint venture

MELBOURNE (BestGrowthStock) – BHP Billiton (BHP.AX: )(BLT.L: ) and Rio Tinto (RIO.AX: )(RIO.L: ) have scrapped their proposed $116 billion iron-ore joint venture 16 months after opposition from regulators, steelmaking customers and some major investors.

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.

Rio and BHP, the world’s second- and third-largest iron ore miners, had touted the deal to put together their iron ore operations in Western Australian as essential as it would reap $10 billion in savings.

“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.

“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 added.

The statement said both parties had recently been advised that the proposal would not be approved in its current form by the European Commission, Australian Competition and Consumer Commission, Japan Fair Trade Commission, Korea Fair Trade Commission or the German Federal Cartel Office.

Rio agreed to the deal in June 2009 at a time when iron ore markets had slumped and it was desperate to pay down $40 billion in debt it had taken on with its ill-timed takeover of Alcan.

The company has since slashed that debt pile and iron ore markets have improved sharply, making the iron ore joint venture less appealing to its shareholders, who saw BHP as the big winner in the deal.

BHP tried to take over Rio Tinto in 2008, but called off that hostile bid when the global financial crisis hit around the same time the European regulators raised concerns about the deal.

The company had said that it was confident of winning regulatory approval this time around, but investors were never that certain.

The decision to call off the deal has been widely expected after European regulators indicated they would block the deal.

The deal’s collapse comes as BHP is chasing a $39 billion takeover of the world’s biggest fertilizer maker, Potash Corp (POT.TO: ).

Rio Tinto and BHP agreed to call off the joint venture without triggering a $276 million break fee.

(Reporting by Sonali Paul; Editing by Ed Davies)

BHP, Rio scrap $116 billion iron ore joint venture