Tinto Tie-Up Faces Steely Opposition

By Simon Duke

A MARRIAGE of mining giants BHP Billiton and Rio Tinto looked further away than ever last night after running into heavy opposition from an influential group of customers.

In another blow to BHP’s Pounds 67bn ambitions, the International Iron and Steel Institute (IISI) has urged competition authorities to reject a merger of the two ore goliaths.

The IISI represents 19 out of the world’s biggest 20 steelmakers – whose main raw material is iron ore – and its support is pivotal to the success of BHP’s plan.

The Anglo-Australian miner shocked investors by revealing plans to mount the second-biggest takeover of all time, offering three of its shares for every one Rio Tinto share in an all-paper deal.

Rio swiftly rebuffed the move, but that hasn’t stopped BHP chief executive Marius Kloppers embarking on a whistle-stop tour of Rio’s main investors in the UK, Australia and South Africa.

The IISI said Kloppers’ efforts to get shareholders on board deserve to end in failure.

With 70pc of global steel ore currently in the hands of BHP, Rio and Brazil’s CVRD, a union of the opposition two companies would create a ‘virtual monopoly’ in the industry, it said.

‘This merger is not in the public interest and should not be allowed to proceed,’ added the industry body.

Demand for iron and steel and other basic materials has gone through the roof in recent years, driven by the booming economies of China and India.

That has led to a feeding frenzy for mining stocks, ushering in a wave of consolidation in the industry.

But the IISI is not alone in arguing that the BHP/Rio union is a step too far.

The Chinese steel trade body yesterday expressed its concerns over the deal, while its Japan counterpart said the proposed merger would create a ‘huge Gulliver … to impede competition’ in the industry.

The Japan Iron and Steel Federation estimates that BHP (down 83p to 1519p) and Rio would between them control over 40pc of the world’s iron trade and 60pc of Japanese imports.

Aside from opposition within the industry, Kloppers’ meetings with Rio (down 327p to 5053p) investors have been far from a roaring success..

(c) 2007 Daily Mail; London (UK). Provided by ProQuest Information and Learning. All rights Reserved.