The World

October 29, 2008 5:05 PM

Can Japan Stop the Monster Rio Tinto-BHP Billiton Deal?

Posted by Zach Lowe

The Japanese government plans to ask the European Union's antitrust regulators to block the proposed merger between Anglo-Australian mining giants Rio Tinto and BHP Billiton, citing the possibility of anticompetitive pricing should the world's first- and third-largest mining companies combine, according to Bloomberg and Reuters.

It is "extremely rare" for a government to request regulatory action from another country on behalf of its customers, says Steven Newborn, co-chair of the antitrust and competition group at Weil, Gotshal & Manges.

The deal consists of an unsolicited $165 billion offer from BHP which Rio has repeatedly turned down, as The Am Law Daily has covered before. The total value of the deal may now be as low as $70 billion after stock in both companies plunged in recent months, Reuters says.

Europe remains the biggest regulatory hurdle for the deal after U.S. antitrust authorities gave it the go-ahead in July.

A team from Skadden, Arps, Slate, Meagher & Flom is leading BHP Billiton's antitrust efforts in the U.S. and abroad. A Slaughter and May team led by Nigel Boardman also is advising BHP.

Japan is taking the unusual step before the EU because its steel companies rely on Rio and BHP for about 60 percent of their iron ore, the raw material that goes into making steel, the Bloomberg report says.

Japan apparently believes it has no grounds to block the deal on its own, since neither company is headquartered there, Newborn says. Such considerations don't usually stop U.S. regulators, who will challenge any deal that may unfairly impact American consumers, regardless of whether the companies involved operate here, Newborn says.

"Their mandate is: whenever a deal might have an effect on commerce here, it's in their jurisdiction," Newborn says.

U.S. authorities also have a lower threshold to meet before they can challenge international deals, Newborn says; they must show only that one of the companies involved earns at least $63 million in sales from U.S. customers.

The EU will not be under any obligation to consider Japan's objections, but they likely will consider them--as they would for any concerned customer, Newborn says.

"But it's just one of many factors they will consider," he says.

Boardman and David Fox, a lead Skadden partner on the antitrust case, declined comment on Japan's apparent objection.

Linklaters and Allens Arthur Robinson are advising Rio Tinto.


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