October 12, 2008

BHPB bid for Rio –Japanese authorities to start probe

FT reported that the Japan Fair Trade Commission will start having hearings with BHP Billiton and Rio Tinto shortly to investigate the proposed alliance between the two companies after a request from Japan Iron and Steel Federation’s request last week to take appropriate actions in order to block BHP’s proposed takeover of Rio Tinto.

The JFTC official said the commission will shortly start holding hearings with BHP Billiton, Rio Tinto, their competitors and users.

The report cited a JFTC official in charge of corporate mergers as saying that “There is a possibility of blocking the deal. We must examine Japanese law to find out whether we can really do this because the two companies have no operational bases in Japan.”

However, the report quoted some Tokyo based anti trust lawyers as saying that it would be difficult for JFTC to block the deal. Mr Kenji Ito, an anti trust lawyer at Mori Hamada & Matsumoto, said that “I think it is legally possible to order BHP to stop the deal, but the problem is that BHP may not follow the order. If violated, JFTC will impose penalties. But the companies with no presence in Japan may force through the deal.”

A spokesperson at the JISF said the federation had asked JFTC to examine the proposed merger as a third party situation. The federation also urged JFTC to co ordinate with its overseas counterparts in the event JFTC does not have the authority to block the deal. The spokesperson said JISF had already made similar requests to the Australian authority and the European Commission.