Australia-based mining giant BHP Billiton Ltd. withdrew its offer to acquire its Brazil-based rival Rio Tinto Ltd. in late November 2008. BHP and Rio Tinto rank second and third in market share of the global iron industry and combined would have been the world’s largest iron ore company. Although the merger gained approval from competition authorities in Australia, South Africa and the United States, antitrust regulators in the European Union and Japan raised concerns about the proposed takeover, especially with respect to higher iron ore prices for these jurisdictions’ steel companies.
On November 4 the EC issued a statement of objections indicating that it would require BHP to divest certain iron ore and metallurgical coal assets as a precondition to accepting the proposed transaction. The Japan Fair Trade Commission (JFTC) also reportedly intended to require a divestiture of assets or a full rejection of the acquisition. The JFTC struggled to obtain BHP’s cooperation in November and threatened criminal prosecution unless the company complied with its requests for information. This marks the first time the JFTC has intervened in a merger or acquisition between two non-Japan-based companies.
BHP directors denied that the regulatory obstacles in the European Union and Japan affected its decision to abandon the transaction. Rather, they cited the recent economic downturn and falling commodity prices as the exclusive reason for not proceeding with the acquisition of Rio Tinto. However, BHP stated earlier this year that the deal would have been more profitable in a weak market, raising speculation by some observers that the hurdles erected by competition authorities, particularly in the European Union, were the main source for the withdrawal of BHP’s bid.
