Rio, BHP statements on calling off iron ore JV

SYDNEY (BestGrowthStock) – Following are statements issued by Rio Tinto (RIO.AX: ) and BHP Billiton (BHP.AX: ) on calling off their $116 billion iron-ore joint venture.

RIO TINTO

“Rio Tinto and BHP Billiton have jointly decided to end plans for an iron ore production joint venture in the Pilbara in Western Australia following extensive discussions with regulators. Both parties have 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.

Some regulators have indicated they would require substantial remedies that would be unacceptable to both parties, including divestments, whereas others have indicated they would be likely to prohibit the transaction outright. The parties have mutually agreed that no break fee is payable.

Tom Albanese, chief executive, Rio Tinto, said: “The full value of the synergies on offer from a 50:50 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.”

Rio Tinto has exceptional operating assets and expansion potential in the Pilbara and we are already pushing ahead with a major development program. We also have a range of very attractive growth options across all of our product groups, with investment of more than US$13 billion in capital projects planned over the 18 months to December 2011.”

BHP BILLITON

” On 5 June 2009, BHP Billiton and Rio Tinto signed core principles to establish a production joint venture covering the entirety of both companies’ Western Australian Iron Ore assets. This resulted in the signing of definitive agreements on 5 December 2009. The completion of these agreements was subject to a number of conditions, including regulatory approvals.

Since the agreement was signed it has become increasingly apparent that regulatory approvals of the joint venture are unlikely to be achieved. Consequently, BHP Billiton and Rio Tinto have reluctantly agreed to dissolve the proposed joint venture.

BHP Billiton Chief Executive Officer, Marius Kloppers, said, “The large synergies from combining our West Australian iron ore assets with Rio Tinto’s have caused us to persevere in seeking to obtain regulatory approvals. However, it has become clear that this transaction is unlikely to obtain the necessary approvals to allow the deal to close and as a result both parties have reluctantly agreed to terminate the agreement.”

Mr Kloppers said he appreciated the high level of cooperation and goodwill displayed by Rio Tinto in pursuing the joint venture. The parties have mutually agreed that no break fee is payable.

While BHP Billiton was progressing approvals for the joint venture, it has continued to invest in its Western Australia Iron Ore business. With the termination of the joint venture, this focus on efficiently growing and operating our West Australian Iron Ore business through our existing Perth-based Iron Ore management team will continue.”

Rio, BHP statements on calling off iron ore JV