CHICAGO - BHP Billiton and Rio Tinto said Monday that they were terminating 16-month-old plans for a joint venture covering their Western Australian iron ore assets blaming regulatory roadblocks.
The announcement followed shortly upon a German government cartel office statement that it intended to prohibit the joint venture. Rio Tinto executives said both companies had been told that the proposal would also not be approved by the European Commission, Australian Competition and Consumer Commission, Japan Fair Trade Commission and Korea Fair Trade Commission.
Some of the regulators had told the companies they would require substantial changes, including divestments, which would be unacceptable to both Rio Tinto and BHP Billiton, Rio Tinto executives said in a statement. Some of the regulators said they expected to prohibit the transaction outright, they added.
The two companies agreed that a US$275.5 million break fee would be not be paid by either party to end the definitive agreement reached last December.
The fate of the US$116 billion merger, which the companies had said would unlock US$10 billion in synergies, had been the subject of speculation for months with steel manufacturers opposing it for the prospect of reduced competition for their raw materials requirements.
"The large synergies from combining our Western Australian iron assets with Rio Tinto's have caused us to persevere in seeking to obtain regulatory approvals," Marius Kloppers, BHP Billiton chief executive, said in a statement. "However, it has become clear that this transaction is unlikely to obtain the necessary approvals to allow the deal to close."
"Both companies have worked hard together over the last 16 month in a positive spirit to demonstrate the pro-competitive effects and I am disappointed that ultimately the regulators did not agree with us," added Tom Albanese, Rio Tinto chief executive.
Both companies said they would continue to invest separately in the operations that would have been part of the joint venture.