Mining giant Rio Tinto said yesterday it would “close a chapter” and move on after the world’s biggest miner, BHP Billiton, dropped its US$70 billion hostile takeover bid for the group.
BHP walked away from its long-running campaign for the Anglo-Australian miner on Tuesday, blaming the deepening financial crisis and falling commodity prices for the decision to drop the deal to create a global mining behemoth.
The proposed merger of the world’s largest and third-largest miners had been repeatedly rejected by Rio Tinto, which said the all-stock deal significantly undervalued its assets.
There were concerns that the proposed mega-deal would create a mining giant with too much control over commodity prices and the offer was still subject to a competition ruling from the European Commission when BHP halted its bid.
Rio Tinto chairman Paul Skinner, in Sydney for a breakfast business briefing, said the companies would remain in contact because of their intersecting interests but it would be business as usual from now on.
“We didn’t start this process, we didn’t end this process. I can’t predict what they may or may not do,” he said.
“I think the priority for Rio Tinto right now is to close a chapter, get on with our lives, and just continue our pursuit of shareholder value,” Skinner said.
DEBT
Skinner downplayed concerns about the group’s debt, much of which relates to the US$38 billion acquisition of Canadian aluminum producer Alcan and which BHP had cited as one of its concerns about the deal given the credit crunch.
“We are comfortable with our financial position, we are confident that our debt position is manageable,” the chairman said.
And he said that the group’s confidence in the industry and its ability to perform well across the cycle remained “quite unshaken.”
“Notwithstanding the year we have had in managing the uncertainties related to the BHP Billiton bid, I think Rio Tinto today is very confident about its ability to deliver consistent value to shareholders as we go forward,” he said.
ASSET SALE
Skinner said the company still expected to proceed with asset sales, some of which have stalled in recent months due to the difficult financial environment.
BHP Billiton’s decision comes as prices for commodities such as copper and aluminum have dropped to three-year lows, while demand for iron ore, a key earner for BHP and Rio, has fallen due to the worldwide slowdown.
Analysts say the miners are unlikely to win the massive price increases in iron ore contracts seen over recent years in the upcoming round of negotiations as the economies of Japan and China slow down.
But Skinner said the long-term prospects for China and other developing economies in the region were still positive, adding that commodity prices were still above historical averages.
Rio’s share price plunged on the news of the deal’s collapse — dropping some 40 percent in overnight trade in London and closing down A$21.89, or 34.3 percent, to A$42.01 in Sydney.
BHP Billiton’s Australian-listed shares closed up A$1.03, or 3.9 percent, at A$27.25.
Asked about the share price fall, Skinner said: “How much of that is just positions being unwound, people long, people short? I think it’s going to take a little while to assess the impact.”
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