Melbourne, Australia — MININGREVIEW.COM — 25 November 2008 – BHP Billiton Limited – the world’s largest mining company – has abandoned its more than year-long pursuit of the Rio Tinto Group, blaming the rout in commodities prices and the credit-market squeeze for the derailment of what could have been the world’s biggest hostile takeover.
A statement issued here confirmed that BHP Billiton intended to write off the costs of approximately US$450 million (R4.7 billion) incurred in progressing this matter over the eighteen months up to today’s announcement in the December 2008 half year results.
Despite the near-term challenges, BHP Billiton remained in a very strong position with net debt of only US$6.3billion (R66 billion) at 31 October, 2008, and a portfolio of assets that would continue to deliver sound cash-flows.
Today’s BHP Billiton Board decision underlined the fact that it no longer believed that completion of the company’s offers for Rio Tinto would be in the best interests of BHP Billiton shareholders.
Chairman Don Argus said here that this decision was first and foremost about BHP Billiton shareholder value and risks to that shareholder value.
“We have said that we would only seek to complete the transaction if it was in the best interests of BHP Billiton’s shareholders,” he explained. “While we have not changed our view of the basic industrial logic of the combination, nor of the longer term prospects for natural resource demand growth driven by emerging economies, we have concerns about the continued deterioration of near-term global economic conditions, the lack of any certainty as to the time it will take for conditions to improve, and the risks that these issues imply for shareholder value,” Argus added.
BHP Billiton CEO Marius Kloppers commented: “We have previously said that similar cultures and the overlap of key assets and infrastructure make this a compelling combination. Recent global events and associated falls in commodity prices have, however, altered risk dimensions. BHP Billiton is very focused on balance sheet strength. Accordingly, the greater debt exposure of the combination, plus the difficulty of divesting assets, have increased the risks to shareholder value to an unacceptable level,” he said.
“Our strong balance sheet is a competitive advantage in times like these, together with our portfolio of long-life, low cost, expandable, Tier 1 assets,” Kloppers concluded. “We believe this places us in a better position than any other major mining company to deal with these uncertain times, “ he concluded.”