BHP Billiton Withdraws Hostile Bid for Rio Tinto.
On the front of its Marketplace section, the Wall Street Journal (11/26, B1, Matthews, et al.) reports that "BHP Billiton abruptly broke off its 18-month pursuit of rival mining company Rio Tinto, saying the recent fall in commodity prices and worsening world economy made the $68 billion deal too risky to complete." Even though "BHP said it could still pursue other mining companies weakened by the downturn, the collapse of the all-stock combination -- once valued at more than $170 billion -- could be the last nail in the coffin of the great merger-and-acquisition boom that stretched from 2004 to 2007." According to the Journal, "the merger would have left 70% or more of the world's seaborne iron ore, a key steelmaking ingredient, in the hands of two companies -- BHP-Rio and Brazilian mining concern Companhia Vale do Rio Doce -- giving them extraordinary leverage over buyers. Steelmakers protested the merger from the outset."
The New York Times (11/26, B3, Wassener) adds, "BHP Billiton, the world's largest mining company, abandoned its hostile bid to acquire Rio Tinto" also saying that "regulatory concerns in Europe meant the deal was no longer in its shareholders' best interest." Notably, "BHP's decision, which took most observers by surprise, is one of the sharpest examples to date of the way in which global financial and economic turmoil is jeopardizing corporate expansion plans." BusinessWeek (11/25, Scott) also reported the story.
WSJournal Calls BHP Withdrawal "Pyrrhic Victory" For Chinese Steel Group. The Wall Street Journal (11/25, Peaple) notes, "By accident or by design, China Inc. is getting what it wanted in BHP Billiton's withdrawn bid for Rio Tinto. For a key player in the contest -- Chinalco -- it's surely a Pyrrhic victory. Together with the U.S.'s Alcoa, Chinalco -- or Aluminum Corp. of China as it's formally known -- last February paid $14.1 billion for a 12% stake in Rio Tinto's London-listed shares, giving it a 9% share of the Rio Tinto Group." Notably, "Chinalco put up the lion's share of the money." The Journal points out, "A joint BHP-Rio Tinto entity would have had enormous pricing power over key raw materials such as iron ore -- no good thing for China's steel companies."
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