BHP Billiton → Rio Tinto
A hostile all-share bid that would have created a single mining super-major controlling roughly a third of the seaborne iron-ore market. Withdrawn as Lehman fell.
An all-share hostile bid raised in February 2008 and withdrawn that November as commodity prices collapsed.
- Value
- $147B
- Announced
- November 2007
- Outcome
- Terminated
- Sector
- Industrials
- Deal type
- acquisition
- Acquirer
- BHP Billiton (Australia)
- Target
- Rio Tinto (United Kingdom)
Why it mattered
Iron-ore prices had tripled in five years on Chinese steel demand and BHP wanted price-setting power at the mine gate, not just at the port. Combining Pilbara production with Rio's Hamersley basin would have consolidated the world's two largest low-cost iron-ore operations into a single seller facing a single buyer bloc.
The story
BHP announced its intention to bid in November 2007 and formalised a 3.4-for-1 all-share offer in February 2008. Beijing's response arrived in the form of Chinalco — the state aluminium champion — taking a 9% dawn-raid stake in Rio to serve as a blocking position. The EU Commission opened a Phase II review. Rio management rejected every price. When commodity prices cratered in Q3 2008 and Lehman failed in September, BHP concluded the combined balance sheet couldn't carry the required divestitures at fire-sale prices, and walked on 25 November 2008.
What it left behind
An attempted follow-up joint venture on iron-ore in 2009 was itself abandoned in 2010 under the same antitrust pressure. Rio Tinto's near-bankruptcy under its own Alcan debt through 2009 arguably rewarded BHP's discipline in walking. The deal is the standard-issue case study for "commodity M&A at the top of the cycle."
At a glance
- Structure
- All-share, hostile
- Announced (intention)
- 8 Nov 2007
- Formal offer
- 6 Feb 2008
- Withdrawn
- 25 Nov 2008
- Chinalco stake
- 9% of Rio Tinto plc
- Combined iron-ore share
- ~36% seaborne
- EU Commission
- Phase II review opened
- Break fee
- None