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BHP Billiton drops hostile $66b Rio Tinto bid as debt fears grow
Top global miner BHP Billiton dropped a $66 billion (Dh242.41 billion) hostile offer for rival Rio Tinto on Tuesday, the latest casualty of a global crisis that has frozen credit markets and hit demand for raw materials.
- Reuters
- Published: 23:15 November 25, 2008
Sydney: Top global miner BHP Billiton dropped a $66 billion (Dh242.41 billion) hostile offer for rival Rio Tinto on Tuesday, the latest casualty of a global crisis that has frozen credit markets and hit demand for raw materials.
BHP shares jumped more than a fifth in hectic London trading, while Rio Tinto slumped as much as 40 per cent.
BHP Chief Executive Marius Kloppers said the global market turmoil and a slump in commodity prices had altered what had been a "compelling" case for merging the world's second and third-largest iron ore producers behind Brazil's Vale.
"The greater debt exposure of the combination, plus the difficulty of divesting assets, have increased the risks to shareholder value to an unacceptable level," he said in a statement.
When BHP first put forward its all-share offer for Rio late last year, it was worth close to $140 billion and would have been the second biggest bid in corporate history after Vodafone's acquisition of Mannesmann in 2000.
BHP, which had already won US and Australian regulatory clearance for a deal, said it had been ready to offer concessions to Brussels to secure the European Commission's blessing, but would not have been able to sell assets at a fair price in the current climate.
BHP will write off around $450 million in costs involved in pushing the deal so far.
Rio Tinto, which had consistently rejected BHP's sweetened offer of 3.4 of its shares for each Rio share as undervaluing the company, said it had no immediate comment.
"There's certainly been no indication BHP would do this - it's a surprise," said Tim Barker, resources analyst at BT Financial Group in Sydney.
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