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BHP Billiton, Rio Tinto Terminate Iron Ore Production JV
10/19/2010 - BHP Billiton and Rio Tinto 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 been advised recently that the proposal would not be approved in its current form.
BHP Billiton and Rio Tinto 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 been advised recently 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.
The companies noted that some regulators indicated they would require substantial remedies that would be unacceptable, including divestments, while others would be likely to prohibit the transaction outright. The parties have mutually agreed that no break fee is payable.
On June 5, 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 December 5, 2009. The completion of these agreements was subject to a number of conditions, including regulatory approvals.
Tom Albanese, Chief Executive of 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 Chief Executive Officer, Marius Kloppers, said, “The large synergies from combining our Western 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.”
BHP Billiton has continued to invest in its Western Australian Iron Ore business. With the termination of the joint venture, the company says its focus on efficiently growing and operating its Western Australian Iron Ore business through the existing Perth-based Iron Ore management team will continue.
