Create a free account to continue

EU Widens BHP Billiton-Rio Tinto Antitrust Probe

Initial investigation of the proposed acquisition of Rio Tinto by BHP Billiton revealed concerns about higher prices and reduced choice for European customers.

BRUSSELS, Belgium (AP) -- The European Commission on Friday widened its antitrust probe into the proposed acquisition of Rio Tinto Inc. by BHP Billiton Ltd., saying an initial investigation revealed concerns about higher prices and reduced choice for European customers of the mining concerns.

Both are British-Australian dual-listed companies mining and marketing iron ore, coal, uranium, aluminum, mineral sands, copper and diamonds and other base metals and industrial minerals.

Under European Union rules, the Commission now has until Nov. 11 to make a final decision.

EU antitrust chief Neelie Kroes said in a statement that the "commodities produced by BHP Billiton and Rio Tinto are basic inputs for major industrial sectors" that are key to the competitiveness of European industries.

"The recent surge in commodity prices has had a serious impact on the industries buying these commodities, their customers, and ultimately all the consumers in Europe and elsewhere in the world," she added.

"In this very sensitive, context any change making the situation worse could be extremely harmful."

Billiton's takeover of Rio Tinto would combine the No. 2 and No. 3 iron miners and allow them to overtake Companhia Vale do Rio Doce, the world's largest iron ore miner.

Rio Tinto has said BHP Billiton's offer undervalues it. BHP Billiton made a hostile, all-equity bid in February, then valued at $147.4 billion, for Rio Tinto. At 3.4 of BHP shares for every Rio Tinto share, the value of the deal fluctuates with share prices.

On Thursday, BHP Billiton said U.S. antitrust regulators had granted partial approval for its bid for Rio Tinto which it said was now valued at $170 billion.

It said the U.S. Department of Justice and the U.S. Federal Trade Commission had ended an antitrust waiting period on the proposed deal. The waiting period, under the Hart-Scott-Rodino Act, is used to determine if a takeover violates antitrust laws and BHP said the end of the period satisfied part of U.S. preconditions for clearing the deal.

The acquisition will also need EU and Australian regulatory approval.

In May, European steelmakers urged Kroes to block the deal saying it would allow a company that could fix prices for steel's key raw material.

The Commission indicated its preliminary investigation suggested the same thing.

The Billiton-Rio Tinto linkup will get a "significant share in the supply of iron ore and together with its next competitor would control a very large part of iron ore supplies," it said.

It said there was a serious risk that "the planned takeover could have a negative impact on the outcome of price negotiations with steel customers. Furthermore there is a serious risk that the merged entity might have the incentive to reduce the scale of its investment projects or slow down such investment, and so reduce supplies available on the market and increase prices."