challenge likely for ore deal

http://www.news.com.au/business/breaking-news/challenge-likely-for-ore-deal/story-e6frfkur-1225808035838


BHP Billiton and Rio Tinto may struggle to convince some world regulators to accept their $US116 billion ($126.9 billion) iron ore joint venture plans, analysts say.

The mining giants signed a binding agreement on the weekend to join their iron ore operations in Western Australia's resource-rich Pilbara region.

Plans for the joint venture were originally announced in June and it is understood talks have since been ongoing with some regulators.

Synergies estimated at $US10 billion will flow from the deal, which will merge adjacent mines, reduce rail hauls and combine general overhead activities into a single entity, the companies have said.

The miners have lodged submissions with the European Commission, the Australian Competition and Consumer Commission and other jurisdictions in relation to the joint venture.

Yesterday, the ACCC said it hoped to announce a decision on whether to approve the deal on February 24 next year, and that submissions could be made until January 15.
Rio Tinto and BHP Billion on Saturday said they expect the joint venture to be completed in the second half of 2010.

The ACCC last year approved the ultimately unsuccessful takeover of Rio Tinto by BHP Billiton, making it unlikely the body will rule against the new joint venture, RBS Morgans resources analyst Warren Edney said.

But analysts have said other regulators are coming under pressure from steelmakers not to allow the deal and the companies may struggle to get the green light.

Steelmakers in Europe, China and Japan have argued against the deal, fearing it could give the world's second and third largest iron ore producers too much market power.

Last month European steel makers petitioned against the joint venture, saying it could increase prices.

Mr Edney said the state of the European steel industry made it more difficult for the Europeans to give the deal the go-ahead.

"I don't think it is a foregone conclusion that the EU Competition Commission will pass it," Mr Edney said.
Chinese regulators may also find it tough to accept the joint venture plans.

The Chinese government-controlled China Iron and Steel Association has said it would resolutely oppose the agreement, which had a "strong monopolistic colour".

Shares in BHP Billiton closed down 79, at $40.61, while Rio Tinto shares fell 26 to $71.59.