Regulators Thwart Rio Tinto/BHP Billiton Plans for JV

Although regulatory authorities nixed the proposed iron ore joint venture in Western Australia between Rio Tinto and
BHP Billiton, Rio Tinto announced soon afterward it plans to invest $3.1 billion to boost infrastructure capacity in
the Pilbara to 283 million mt/y by 2013. Shown here is a Rio Tinto ore-blending facility at Yandicoogina, W.A.
Rio Tinto and BHP Billiton announced in mid-October they would no longer pursue plans for an iron ore production joint venture in the Pilbara in Western Australia. The mutually agreed decision came after it became apparent regulators were unalterably opposed to the proposed combination of assets.

“Both parties have recently been advised 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,” Rio Tinto’s statement said. “Some regulators have indicated they would require substantial remedies that would be unacceptable to both parties, including divestments, whereas others have indicated they would be likely to prohibit the transaction outright. The parties have mutually agreed that no break fee is payable.”

Plans for the joint venture were announced in June 2009, and definitive agreements were signed in early December 2009. Potential production and development synergies from the joint venture were estimated by the companies at more than $10 billion, including possible combining of current adjacent mines into single operations, ore blending opportunities, optimizing future expansion projects, more efficient use of rail and port infrastructure, and combining management, procurement and general overhead activities.

Rio Tinto chief executive Tom Albanese 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 procompetitive effects, and I am disappointed that ultimately the regulators did not agree with us.”

As featured in Womp 2010 Vol 09 -