Snubbed China may apply anti-monopoly law to Rio Tinto-BHP Billiton deal
17 June 2009
After being stumped out of its biggest-ever overseas investment last month, China is now planning to strike back by scuttling the Rio Tinto-BHP Billiton mining joint venture by applying its own anti-monopoly law.
After its elaborate propsal for a $19.5-billion investment in Rio for an 18-per cent stake and board seats fell apart, China has retaliated with its ministry of commerce (MoC), yesterday saying that China's anti-monopoly law would apply if the revenue of the Rio Tinto - BHP Billiton Pilabra mining joint venture exceeded a certain amount.
Debt-ridden mining giant Rio Tinto had terminated its $19.5-billion planned deal with Chinese giant Chinalco on 5 June 2009, under sustained opposition from shareholdrs, opting instead to raise $15.2 billion from existing shareholders and another $5.8 billion through a new iron ore joint venture with its arch rival BHP, whose sustained acquisition advances it had rebuffed since 2006. (See: Rio terminates Chinalco deal; to raise $15.2 billion through rights issue / Rio-BHP team up for mining venture)
Cash-strapped Rio, which had almost $40 billion of debts in February 2009, had to meet an October 2009 deadline to repay $8.9 billion bond dues. Chinalco offered to inject $19.5 billion by raising its overall stake in Rio from 9 per cent to 18 per cent and demanded two seats on Rio's board.
The deal, however had evoked widespread opposition from the public, politicians, shareholders and arch rival BHP Billiton on the issue whether the investment from the state-owned entity was in Australia's national interest. (See: Chinalco-Rio Tinto deal fuels political storm / Rio Tinto's majority shareholders oppose Chinalco deal at UK AGM)
BHP Billiton believed that the Chinalco-Rio Tinto deal would give the Chinese privy to inside information of pricing of minerals since Chinalco is also a major buyer, both at Rio and BHP Billiton.