Broken Deal between BHP Billiton and Rio Tinto

Added by Gary Dunn on October 19, 2010

Only 16 months after revealing their joint venture plan, BHP Billiton and Rio Tinto canceled the $116bn iron-ore joint venture proposal.

The deal was expected to be cancelled since major investors in companies, steelmakers and regulators had made their opposition more than clear.

This marks the second try of BHP to get its hands on the superior iron-ore assets that Rio Tint has. Now BHP will be focusing on the $39bn bid for Potash Corp, the world’s largest fertilizer maker.

An analyst at the ATI Asset Management stated for Reuters that “the failure of the joint venture will be slightly more positive for Rio than BHP, but it’s important to remember it’s actually a negative for both companies”.

BHP and Rio could have another option to realize the joint venture in Western Australia, but statements with regard to this possibility are yet to be given.

European regulators, however, had made it clear that they would block the deal if it came to that, thus the decision wasn’t a surprise for anyone.

Both companies have continued production expansion on their own, and Rio has committed approximately $1bn already, while it’s getting ready to boost production by 50 per cent for a total of 330m metric tons of iron ore per year.