BHP Billiton, the world's largest mining company, has decided to walk away from its over $60 billion hostile takeover bid of rival Rio Tinto, citing deteriorating global economic conditions.
After pursuing the bid for more than a year, BHP Billiton today said that the company's board no longer believes that completion of the deal "would be in the best interests" of its shareholders, though, if materialised, it would have seen one of the biggest consolidation in the global mining sector.
"While we have not changed our view of the basic industrial logic of the combination, or 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...," BHP Billiton Chairman Don Argus said in a statement.
Argus also pointed out that there was lack of certainty as to the time when the global economic conditions would improve.
Over a year ago, when BHP Billiton expressed interest in Rio Tinto, the prospective deal was estimated to be worth $140 billion. However, with share prices of both entities falling, the value of the deal has come down to around $62 billion.
Commenting on the decision to abandon the bid, BHP Billiton's Chief Executive Marius Kloppers said that recent global events and associated falls in commodity prices have, however, altered risk dimensions.
BHP Billiton is very focussed on balance sheet strength. Accordingly, the greater debt exposure of the combination plus the difficulty of divesting assets have increased the risks of shareholder value to an unacceptable level.
