BHP's $114 billion bid for Rio gets Australia regulatory nod

01 October 2008

Mumbai: Mining giant BHP Billiton Ltd moved a step closer to acquiring rival Rio Tinto with the Australian Competition and Consumer Commission approving its proposed $114 billion hostile bid, announced nearly a year ago.

BHP's acquisition of Rio Tinto, which in turn last year made a $38 billion takeover of Alcan, could create a $220 billion mining giant that would dominate the mining sector and vie with Brazil's Cia Vale do Rio Doce as the world's largest supplier of iron ore.

''While significant concerns were raised by interested parties in Australia and overseas, the ACCC found that the proposed acquisition would not be likely to substantially lessen competition in any relevant market,'' ACCC chairman Graeme Samuel said in a statement.

The commission also referred to the role steelmakers were playing in consolidating the industry – Australian steelmaker Midwest Corp was recently taken over by Chinese state-owned trading firm Sinosteel.

''The ACCC's inquiries indicated that the merged firm would be unlikely to limit its supply of iron ore given the uncertainty it would face in relation to the profitability of this strategy and the risk that limiting supply would encourage expansions by existing and new suppliers as well as sponsorship of alternative suppliers by steel makers,'' Samuel said.

BHP has addressed the main concern of the Australian watchdog about the impact the merger by entering into a long-term supply contract with the country's steel makers.