The plan of BHP Billiton and Rio Tinto's establishment of an iron ore joint venture, which has been widely watched by the market, is facing a "death" situation due to challenges from the regulatory level and opposition from shareholders.
Rio Tinto issued a statement on October 5, saying that the recent feedback from national regulators on the "two extensions" iron ore joint venture project, the project may face obstacles in obtaining regulatory approval.
These feedbacks include the preliminary findings of the Japan Fair Trade Commission and the Korea Fair Trade Commission, as well as exchanges with the European Commission and the Australian Competition and Consumer Commission.
Rio Tinto said that it had discussed a series of issues including iron ore joint ventures at a board meeting on October 4. However, “the Rio Tinto Board of Directors has not yet made a final decision on the possible outcome of the Western Australian iron ore joint venture project or the next steps.â€
According to Australia's "Sydney Morning Herald" previously reported, Rio Tinto is likely to abandon its joint venture with BHP Billiton as Rio Tinto's financial situation has improved, shareholders have exerted tremendous pressure and the joint venture project is more favorable to BHP Billiton.
Du Lishi, chairman of Rio Tinto, said at the meeting that he believes that even if Rio Tinto proposes to withdraw from the joint venture project, BHP Billiton will not object. Another Rio Tinto director Mike? Fitzpatrick proposed a plan B to convert the “two extensions†from the iron ore joint venture plan to shared infrastructure and other equipment.
On June 5 last year, Rio Tinto announced that it would abandon the introduction of Chinalco's $19.5 billion transaction and announced that it will establish a joint venture with BHP Billiton's iron ore assets in Western Australia. For this, BHP Billiton will invest an additional US$5.8 billion. To ensure that the shareholding ratio of both parties is 50% each. The joint venture plan also requires approval from national regulators and shareholders of both companies.
Previously, the two companies had expected to clear the barriers at the regulatory level in the second half of 2010. However, the anti-monopoly approvals faced by the “two extensions†iron ore joint ventures are hampered. The Australian Competition and Consumer Commission, which was once thought to have successfully approved joint venture projects, has postponed the announcement of several decisions, saying it will take time for the two companies to provide more materials.
BHP Billiton and Rio Tinto agreed that if one party suspends the agreement in advance, it will pay the other party a break-up fee of $275.5 million.
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