Larvatus Prodeo

BHP Billiton has decided to abandon its plans to buy Rio Tinto. Aside from the antitrust concerns of customers and regulators around the world, a major reason for BHP’s decision involves another acquisition:

A big factor in the decision was the size of Rio’s debt, which blew out to about $US42 billion ($65.8 billion) after the ill-timed acquisition of Canadian aluminium group Alcan last year. BHP carries only $US6 billion in debt. “It is just not the right time to be taking on the debt that is on Rio’s balance sheet,” Mr Kloppers said.

Chinese steel mills, which were concerned that a BHP-Rio combination would be able to control prices for iron ore and other raw materials, were also pleased the offer was dead.

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