BHP Billiton scraps Rio Tinto bid


BHP Billiton scraps Rio Tinto bid
BHP Billiton has dropped its $66 billion offer for Rio Tinto as the global economic slowdown dampens demand for natural resources.

The firm had offered 3.4 BHP Billiton shares for every Rio Tinto share but withdrew the bid after a fall in commodity prices and regulatory demands from European anti-trust authorities that the company sold off assets.

Marius Kloppers, BHP Billiton's chief executive, said the combination of the Anglo-Australian firms remained "compelling".

He added: "Recent global events and associated falls in commodity prices have, however, altered risk dimensions. BHP Billiton is very focussed on balance sheet strength."

The cost of copper has fallen by 43 per cent over the last year, as the global slowdown stifles demand.

In addition, the European Commission would require divestments in iron ore and metallurgical coal, BHP Billiton said.

In normal economic circumstances the firm said it would have been prepared to negotiate on this but given the current economic uncertainties, this would add to the cost and risk of the transaction.

BHP Billiton said it will write off $450 million spent over the 18 months up to today on the bid in the December 2008 half-year results.

Shares in Rio Tinto dived 30 per cent on the news, while BHP Billiton stock rose 12 per cent.

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