Australia’s competition watchdog has cleared global miner BHP Billiton’s proposed $144 billion bid for Rio Tinto, after it was agreed that the take-over wouldn’t lessen competition.
Rio Tinto shares jumped on the news, extending the gains made earlier in the day, soaring as much as 14%, to close $10.50, or 12%, higher at $95.00. BHP Billiton shares rose $1.75, or 5.7% at $32.75, on a day when the overall market jumped 4.2%.
The discount in Rio’s share price to the value of BHP’s offer narrowed to 14% from 19%, as investors grew more confident a deal would eventually go ahead.
The key hurdle for the takeover is approval from the European Commission, which has flagged it is worried about the impact of surging commodity prices on manufacturers and consumers. The EC on Monday set a deadline of Jan. 15 for its in-depth review.
”The ACCC’s inquiries indicated that the merged firm would be unlikely to limit its supply of iron ore given the uncertainty it would face in relation to the profitability of this strategy and the risk that limiting supply would encourage expansions by existing and new suppliers as well sponsorship of alternative suppliers by steel makers,” chairman Graeme Samuel said in a statement.