BHP Billiton, the world’s largest mining company, on Tuesday abandoned its drawn-out hostile bid to acquire its rival Rio Tinto, citing the turmoil in the financial markets and regulatory concerns in Europe.

BHP had offered 3.4 of its shares for each share in Rio Tinto, valuing the smaller company at about $60 billion. Although the sharp falls across the world’s stock markets have depressed the original value of the deal, and Rio has rejected BHP’s original offer as inadequate, the transaction would have been one of the largest M&A deals ever.
BHP said it no longer believed “that completion of the offers for Rio Tinto would be in the best interests of BHP Billiton shareholders.”
In a statement on Tuesday, Don Argus, BHP Billiton’s chairman, said: “While we have not changed our view of the basic industrial logic of the combination, or of the longer term prospects for natural resource demand growth driven by emerging economies, we have concerns about the continued deterioration of near term global economic conditions, the lack of any certainty as to the time it will take for conditions to improve and the risks that these issues imply for shareholder value.”
The company added that “greater debt exposure of the combination plus the difficulty of divesting assets have increased the risks to shareholder value to an unacceptable level.”
Raw materials prices have recently fallen sharply amid expectations that slowing global economic growth will dampen demand, making the transaction less logical, in BHP’s eyes. BHP on Tuesday said copper prices had fallen 43 percent in the 12 months to 21 October; in the month ending 21 November, the price had slumped 23 percent, it said.
Tim Baker, resources analyst at BT Financial Group in Sydney, said the decision came as a big surprise. “This decision suggests that BHP’s board have looked at what’s going on in the market and realized the situation is not quite what it was before because of the economic deterioration,” he told Reuters.
(International Herald Tribune)