The sharp changes in the iron ore market and the opposition of EU regulators have finally doomed BHP Billiton's acquisition plan for its rival Rio Tinto, a plan which has been under operation for nearly a year.
Yesterday, BHP Billiton officially announced its decision to abandon the acquisition, saying that due to the deterioration of the global economic situation leading to an uncertain business prospect for the mining industry, the company no longer believes that the acquisition offer for Rio Tinto could still represent the best interests of BHP Billiton shareholders.
Yestarday, Shan Shanghua, Secretary General of the China Iron and Steel Association, told our reporter in an interview on this matter that the failure of the merger between "the two Tintos" has avoided further concentration in the iron ore market, which is beneficial for Chinese steel mills to diversify their resource acquisition. This is also the time for Chinese steel companies to go abroad and acquire certain mining enterprises. In addition, the price of iron ore next year will definitely fall.
The risk of the merger is great.
At the end of last year, BHP Billiton proposed a stunning plan to acquire Rio Tinto through a stock swap, but it was rejected by Rio Tinto's board of directors on the grounds of "underestimation" of value. In February this year, BHP Billiton raised the acquisition offer to exchange 3.4 shares of BHP Billiton for each share of Rio Tinto. According to the original stock price calculation, it was equivalent to offering Rio Tinto an acquisition price of about $147 billion. In the following year, BHP Billiton has consistently claimed that the acquisition offer did not underestimate the value of Rio Tinto............................