EU warns of tough scrutiny of BHP's takeover of Rio Tinto
05 Jul 2008
After US regulators granted conditional approval to its hostile $170-billion bid for rival mining giant Rio Tinto, BHP Billiton, which yesterday announced a near doubling of its iron ore price to match Rio's (See: BHP clears US regulatory hurdle for Rio deal; doubles iron ore prices), finds itself facing a tougher scrutiny by European Commission anti-trust regulators.
The EU competition commisioner Neelie Kroes said that the recent rise in commodity prices had a serious impact on the industries buying these commodities, their customers, and ultimately all the consumers in Europe and elsewhere in the world and therefore any change could could be "extremely harmful".
She said the commission would pay particular attention to ensure that "this takeover does not adversely affect competition in Europe.''
Asian and European steelmakers have opposed the deal, saying it would enable Melbourne-based BHP excessive influence over iron-ore prices. The Brussels-based International Iron and Steel Institute (IISI) has already asked European regulators to block the merger, warning that such a deal wouldwould create a "virtual" monopoly in iron ore.
The powerful lobby group Eurofer that represents steelmakers including Germany's ThyssenKrupp AG and Luxembourg-based ArcelorMittal, has also asked regulators not to allow the takeover.
A merger of BHP and Rio would also create the world's biggest miner of copper, aluminum, and coal.
Rrising demand from emerging economies such as China has already pushed up Commodity prices nealry fourfold since 2001 .
On 1 July Rio won record iron-ore price increases of 80 per cent to 97 perc ent from Chinese steelmakers and BHP has also arrived at an agreement with Baosteel for the same terms as Rio for its ore during the 2008 contract year.
Rio rejected BHP's sweetened, all-share offer on 6 February, saying it significantly undervalued the world's third-largest mining company (See: Rio Tinto rejects BHP's revised offer of $147 billion) </industry/Mining/20080207_rio_tinto.html>. BHP is borrowing a record $55 billion to fund the acquisition, has raised its offer to Rio shareholders from a 3-for-1 proposal in November to 3.4 shares for every one of Rio's.
(Also see: BHP Billiton may have to offer a 60-per cent premium for hostile takeover of Rio Tinto)