Mother of all deals: Rio-BHP Billiton merger!

Posted : July 16 2009

SYDNEY : In an apparent bid to consolidate their position in the market, Rio Tinto and BHP Billiton are moving towards the merger of their West Australian iron ore operations.

According to Australian newspapers, Rio is still finalising the deal team that will hammer out the finer points of the plan to form a $116 billion iron ore giant.

If it materialises, this will be the world’s largest mining operation. The European Commission, seen as the major regulatory hurdle, is yet to inform the miners of the level of scrutiny to which they will be subjected, report newspapers.

Analysts expect more than $10bn worth of savings for the companies if the deal goes through. Rio and BHP signed a pact last month to merge their huge neighbouring port, rail and mine systems in the Pilbara.

The deal will take a year to consummate and realise a decade-long ambition on both sides. Rio announced the deal the day it jilted Chinalco by canning a $19.5bn rescue package that would have given the Chinese state-owned company an 18 per cent stake in Rio and stakes of up to 50 per cent in the miner’s best assets.

BHP and Rio’s merger plan mobilised opponents in China, Japan and Europe — as well as those determined to benefit from the deal, such as the WA government.

The merged iron ore operation will have few global rivals in terms of tonnes brought to market. Through expansion over the next few years, it is expected to increase a slender lead over its main competitor, Brazil’s Vale, by at least 20 per cent.

Steelmakers around the world have decried the fact the joint venture will immediately control about 320 million tonnes a year of production, or about 40 per cent of the world’s seaborne iron ore supply.

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Mother of all deals: Rio-BHP Billiton merger!

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