The world's biggest miner BHP Billiton today announced it was dropping its controversial hostile takeover bid for rival Rio Tinto due to the state of the global economy.
The massive offer, which would have created a global mining behemoth, had raised concerns from steelmakers that the new company would have too much control over commodity prices.
Rio Tinto repeatedly rejected the offer as too low before the financial crisis had fully kicked in, and BHP chief executive Marius Kloppers said today that it was now off the table.
BHP Billiton increased its to offer to 3.4 of its own shares for every Rio Tinto share in February, effectively valuing Rio, the world's third-biggest miner, at $147.4 billion at the time the offer was made. It had initially offered three for one.
BHP's decision to retract the offer comes as the bid, which had already passed Australian and US competition regulators, was awaiting a ruling from the European Union's regulator.
Rio Tinto had repeatedly rejected the bid, saying it vastly undervalued the Anglo-Australian group, whose major products include aluminium, copper, diamonds, gold and iron ore.
But the global economic crisis has also been felt in the global mining industry. A slowdown in demand from China has already seen the miners cut back on the production of iron ore, a vital ingredient in steel-making, around the world.
Earlier this month Rio Tinto slashed output at its western Australian plants by 10% to bring production in line with revised customer requirements.
And over the weekend BHP said it would reduce iron ore pellet production at the Samarco iron ore interest in Brazil, in which it owns a 50% stake, due to weak demand.
Analysts had predicted that this year's negotiations for contract prices for iron ore would see an end to the stratospheric rises in prices won over the past six years amid booming growth in China and other developing nations.
