BHP Billiton's $US78 billion hostile bid for Rio Tinto has come under fire from competition regulators in Europe and Japan amid concern that the deal would result in higher iron ore, steel and copper prices.
The European Commission has given BHP a list of its objections and the company will have to address these before the takeover can be approved.
The Times has also learnt that the Japanese are becoming increasingly frustrated by BHP's refusal to provide detailed information on the proposed Rio takeover.
Tomorrow the Japanese Government will order BHP, the world's largest miner, to supply information or risk court proceedings.
If BHP presses ahead in spite of Japanese objections, it could lead to the company's operations in the country being criminalised. BHP generated revenues of about $US9 billion - equivalent to roughly 15 per cent of its total turnover - from Japan last year.
BHP's hostile bid for Rio is the largest takeover in the world at present and will create a resources giant with dominant positions in the iron ore, coal and copper markets.
BHP is offering 3.4 of its shares for every Rio share but Rio insists that this undervalues its assets.
The European Commission would not comment on its objections to the proposed Rio deal but they are likely to focus on concerns that a combined BHP-Rio would control more than 34 per cent of the traded iron-ore market.
BHP has already received regulatory approval from Australia, the United States, Canada and South Africa but its offer does not become unconditional until the Europeans give it the go-ahead. Japanese approval has not been sought but the Government, under pressure from its steelmakers and carmakers, is demanding information on the takeover.
On September 24 the Japanese made a formal request for information but received no response from BHP. The Japanese will issue a regulatory order tomorrow demanding that BHP supply details. The company is expected to have up to two weeks to respond.
Katsunori Inaguma, the chief antitrust investigator of the Japanese Fair Trade Commission (JFTC), told The Times that the Australian company's flouting of the regulatory request indicated that it was "a company with no sense of compliance".
Government insiders said that the energy with which the issue was being pursued by the JFTC should be taken as an indication of how seriously it is being viewed by the Japanese administration.
Japan's large steelmakers include Nippon Steel and JFE, the second and third-largest producers in the world. They have suffered from price increases of iron ore, which rose by up to 96 per cent this year, and coking coal, and believe that they have lost all negotiating power.
Akinori Uesugi, a consultant to the law firm Freshfields Bruckhaus Deringer and a former senior JFTC official, said that if BHP offered no details, the JFTC would still take a view on the legality of the merger under Japanese anti-monopoly law.
If the deal were found to be in breach of that law, the JFTC could issue a cease-and-desist order and mount possible criminal proceedings against BHP. This would endanger the company's standing in Japan.
The Japanese Government is also stepping up pressure on the European Union to block the deal. Japan officially denies that it asked for help from the EU in blocking the deal but industry sources said that there had been an "informal overture" to that effect.
A BHP spokesman said that the company was in the process of supplying information to the Japanese authorities and would assist them with their inquiries "as we are doing with many regulatory bodies".
The Times
BHP Price at posting:
$30.80 Sentiment: None Disclosure: Not Held
(20min delay)