BHP, Rio in final stand to save JV

[] — BHP Billiton and Rio Tinto are expected to pursue last-ditch talks with regulators in a bid to save a proposed $116bn iron ore joint venture after the project suffered a new blow.

Germany said on Thursday it would ban the planned merger of the miners’ Western Australian iron ore operations. Analysts and a source said European Union regulators were now set to block the deal.

The hurdle had been widely expected and had little impact on the miners’ Australian-listed shares on Friday. BHP slipped 0.3 percent, while Rio shares rose about 1%.

The miners, which said on Thursday they had not given up on the deal, were not expected to walk away before the deal’s December 31 deadline as they would be forced to pay a break fee.

“I can’t see why either party would front up and pay some A$275 million ($273.4 million) break fee rather than wait,” said Pengana Capital portfolio manager Tim Schroeders.

“There may be a way it can still proceed and it is worth waiting three or four months to see how the regulatory landscape lies,” he said.

Analysts said they expected the miners to consider making some concessions on the joint venture if they felt it could get a deal across the line with regulators.

However, if regulators indicated the joint venture would need major changes to win their blessing the miners would likely walk away.

The setback came as BHP’s $39bn hostile bid for Canadian fertiliser maker was the subject of more legal tussles. Potash asked a US court to force BHP to produce all communications with regulators and government related to its bid.


A statement from the German Federal Cartel Office on Thursday on the iron ore joint venture came the same day that Rio Tinto, the world’s second-largest miner of the steel-making raw material, churned out a record amount of iron ore in the third quarter.

The German regulatory process is continuing and a formal notification is expected to be received by the miners next week.

A source familiar with the situation said EU regulators are set to rule the venture would hurt competition.

Regulators in Australia, Japan, and other markets are also reviewing the deal, but analysts see the Commission as the biggest hurdle due to opposition from EU steel producers.

EU antitrust regulators will meet with Rio and BHP, the world’s third-largest iron ore producer, by the end of this month to discuss the joint venture.