EC investigates Rio takeover

5 July 2008

The European Commission (EC) has opened an investigation into BHP Billiton’s takeover bid for Rio Tinto.

BHP Billiton’s offer is for 3.4 of its shares per Rio Tinto share, valuing the bid at $147.4 billion, based on BHP Billiton’s closing share price at the time the offer was made in early February. The offer would give Rio Tinto shareholders a 44% stake in the merged company, which would have a market capitalisation of $335 billion.

Both BHP Billiton and Rio Tinto are British-Australian dual-listed companies that mine and market a range of commodities such as iron ore, coal, uranium, aluminium, mineral sands, copper and diamonds, as well as various other base metals and industrial minerals. Together, the companies account for about one quarter of annual world uranium production.

The EC said its initial investigation “indicated that the proposed takeover raises serious doubts as to its compatibility with the single market. Concerns arise in particular as regards the markets for iron ore, coal, uranium and aluminium and mineral sands, because the proposed takeover could result in higher prices and reduced choice for these companies’ customers.”

Competition commissioner Neelie Kroes said: “The commission will pay particular attention to ensure that this takeover does not adversely affect competition in Europe.”

The EC has until 11 November to reach a final decision on whether the concentration would significantly impede competition within the European Economic Area, or a substantial part of it.

The move followed the announcement that the antitrust division of the US Department of Justice (DoJ) had concluded its review of the proposed merger without further action. In addition, the DoJ and the Federal Trade Commission (FTC) had granted early termination of the waiting period under the Hart-Scott Rodino Antitrust Improvements Act of 1976, satisfying part of the US merger control pre-condition to BHP Billiton’s bid.


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