Japan gives 11-day ultimatum to BHP over hostile Rio Tinto takeover

The Japanese Government has ordered BHP Billiton, the world's largest miner, to provide details of its proposed $78 billion (?48.3 billion) takeover of Rio Tinto within 11 days or face possible criminal prosecution. The move by the Japanese Fair Trade Commission (JFTC) is believed to be the first time it has made a forcible intervention in a takeover battle between two foreign companies. BHP's proposed hostile takeover of Rio would create a resources giant with dominant positions in iron ore, copper and coking coal. Japan's steelmakers are concerned that a combined BHP-Rio would control about 34 per cent of the traded iron-ore market and be able to push up the price of raw materials. BHP has said the deal would lead to lower prices. BHP-Rio and Vale, the Brazilian miner, would then control more than 70 per cent of the total traded iron ore market and this has prompted concern about the impact of a duopoly from steelmakers around the world. Takahide Matsuyama, the secretary general of the JFTC, said yesterday that BHP had not responded to earlier requests for information. The JFTC will today issue BHP with a compliance order, giving the Anglo-Australian miner until November 17 to supply information on the takeover. If it fails to do so, Japan's competition regulators will rule on the proposed Rio bid. Under those circumstances it seems inevitable regulators would rule the deal anti-competitive. If BHP presses ahead with the deal regardless, the Japanese have hinted at legal proceedings against the miner. Japan accounted for nearly 15 per cent of BHP's $60 billion revenues last year and Nippon Steel and JFE, the second and third largest steelmakers in the world, are among the company's biggest customers. BHP executives entering Japan could be jailed if the courts rule it broke the law pursuing the Rio deal. Despite BHP's lack of co-operation, the JFTC has sought and received responses to the merger from other parties, including Rio Tinto. Mr Matsuyama said Japanese officials are talking to their counterparts in Beijing and Seoul about the proposed deal. He said: “I am sure that the merger would have a huge impact on them as well.” Japanese officials are also understood to have held informal talks with the European Union and are considering making a diplomatic request to block the deal. European Commission regulators gave BHP their objections to the Rio deal this week and the miner must respond. BHP has received clearance for the deal from the United States, Canada, Australia and South Africa. It has made EU acceptance a pre-condition for the deal going ahead but does not require Japanese acceptance. BHP said that it had noted the Japanese request and was now considering its options. www.business.timesonline.co.uk