BHP and Rio Abandon Australian Iron Mining Tie-Up

HONG KONG — BHP Billiton and Rio Tinto on Monday pulled the plug on their plans to form a $116 billion iron ore joint venture after regulators in Australia and elsewhere signaled they would block the deal because of competition concerns.

A revival of demand for raw materials as the global economy regains strength has fueled a string of takeovers and deals in the mining and energy sectors in recent years, and the two companies had hoped to reap substantial savings by combining their iron ore operations in the remote Pilbara region in the state of Western Australia.

BHP and Rio, both of which have headquarters in Australia, are the world’s largest producers of the key steel-making ingredient, along with Vale of Brazil. They had estimated the potential synergies from collaborating on mining, logistics and other infrastructure activities at more than $10 billion.

But the planned joint venture — announced in June 2009, eight months after the collapse of an audacious attempt by BHP to buy Rio outright — had faced intense opposition from steelmakers, anti-trust authorities and some investors.

The European Commission, the Australian Competition and Consumer Commission, the Japan Fair Trade Commission, the Korea Fair Trade Commission and the German Federal Cartel Office had all advised Rio and BHP that their proposed venture would not be approved in its current form, BHP said in a statement announcing the companies’ decision to walk away from their plans.

“Some regulators have indicated they would require substantial remedies that would be unacceptable to both parties, including divestments, whereas others have indicated they would be likely to prohibit the transaction outright,” Rio said, adding that both parties had agreed that no break-up fee would be payable.

“The large synergies from combining our Western Australian iron ore assets with Rio Tinto’s have caused us to persevere in seeking to obtain regulatory approvals,” BHP’s chief executive, Marius Kloppers, said in a separate statement. “However, it has become clear that this transaction is unlikely to obtain the necessary approvals to allow the deal to close, and as a result, both parties have reluctantly agreed to terminate the agreement.”

The collapse of the deal had been widely anticipated by the markets, and the share price reaction on Monday was muted. BHP was down 1.1 percent in midafternoon in Australia, and Rio fell 0.7 percent, broadly in line with the 1 percent decline in the Australian benchmark index S.&P./ASX 200.

For BHP, the collapse of the iron ore deal is now likely to shift management’s attention to its hostile bid for a large Canadian fertilizer company, Potash Corp. of Saskatchewan, worth about $40 billion.

Although BHP is best known for its activities in iron ore, aluminum, copper and coal, the mining company, based in Melbourne, has been expanding into the generally lucrative market for fertilizers, in a bid to tap into the expected soaring demand for fertilizers as the world struggles to feed its growing population.