BHP Billiton dumps Rio Tinto

BHP Billiton has called off itÔÇÖs bid for rival mining company Rio Tinto after falling commodity prices and regulatory demands that it sell off assets has left the firm with more than just cold feet. ┬á The firm said the decision had come from the European Commission, which had been set to deliver a verdict in January on whether the two Anglo-Australian companies could merge, as the combination would create the largest merger in the history of the mining industry. ┬á To get the go-ahead, BHP said the Commission required the firm to sell off certain iron ore and coal businesses, since a merger would give the combined company control of more than a third of the worldÔÇÖs iron ore market. ┬á But compared to record highs in the first half of the year, global commodity prices are falling back sharply as demand has been weakened by the economic slowdown, and BHP is now backing out. ┬á BHP Billiton chief executive Marius Kloppers said that these recent developments and falling prices have ÔÇ£altered risk dimensions.ÔÇØ ┬á ÔÇ£BHP Billiton is very focused on balance sheet strength,ÔÇØ he said. ÔÇ£Accordingly, the greater debt exposure of the combination plus the difficulty of divesting assets have increased the risks to shareholder value to an unacceptable level.ÔÇØ┬á BHP made its original all-share bid for Rio in February of this year, worth $147 billion, but the value of the offer has decreased as BHP share prices have fallen. Based on MondayÔÇÖs closing share prices, the offer would have been worth a disappointing $66 billion. ┬á A majority of analysts say they were pleasantly surprised by BHPÔÇÖs decision, adding that it was good news for steelmakers. ┬á Yang Ki-yeon with Daewoo Securities says ÔÇ£BHPÔÇÖs bid drop for Rio Tinto is positive in that it will not bring about more worries of an iron ore cartel.ÔÇØ ┬á News that BHP has dropped its bid has increased the firmÔÇÖs shares by 15 percent on the London Stock Exchange, while dropping Rio TintoÔÇÖs by nearly 40 percent. ┬á Rio Tinto said in a statement that it would ÔÇ£continue with its strategy of operating and developing large scale, long life, low cost assets to generate significant value for shareholders.ÔÇØ