MercoPress. South Atlantic News Agency

EU steel lobby rejects BHP Billiton Rio Tinto takeover bid

Mining giant BHP Billiton Ltd. formally filed Friday with the European Commission to take over rival Rio Tinto, triggering an antitrust review of the hostile takeover. The EC confirmed the notification and will reach a decision by July 4 when it can approve the deal, open an in-depth investigation or permit a short extension.

But Melbourne based BHP is facing opposition from steelmakers who say buying Rio will create a company that would gain influence over global iron-ore prices. The deal would create the supplier of a third of the world's traded iron ore, the biggest maker of power-station coal and the second-largest producer of aluminum. European steel lobby group Eurofer, which represents producers including Germany's ThyssenKrupp AG and Luxembourg- based ArcelorMittal, said Friday the proposed takeover should be blocked because the enlarged company would dominate the iron-ore market. The takeover would lead to three companies (the two Australians and a Brazilian) controlling 75% of global supply. "Such market dominance increases disproportionately the pricing power of companies concerned in iron ore and coking coal on top of the huge price increases seen over the last years'' said Eurofer Director General Gordon Moffat in a statement. Rio Tinto based in London, rejected BHP all-share offer on February 6, saying it significantly undervalued the world's third-largest mining company. BHP Chief Executive Officer Marius Kloppers, who's borrowing a record 55 billion US dollars to fund the deal, increased his offer to 3.4 shares for every one of Rio's, 13% more than its 3-for-1 proposal on November 8. Kloppers has pledged to spend 30 billion on a share buyback and generate 3.7 billion in cost savings and revenue gains adding the transaction will allow BHP to ship more minerals more quickly to customers in China, the world's largest user of commodities including copper, iron ore and aluminum. The deal is also conditional on regulatory approvals in the US, Australia and South Africa. China that is also concerned about the possible takeover and in the last twelve months has also become a player in the jumbo operation with Aluminum Corp. of China Ltd., Chinalco, and Alcoa Inc. buying 9% stake in Rio last February first in an attempt to thwart BHP takeover bid. The combined BHP/Rio Tinto company would have pretax earnings of 40 billion US dollars and be one of the five largest in the world by market value, Kloppers told investors in November.