Rio Tinto will also launch a vast rights issue to raise US$15.2bn. Rio and BHP will launch a 50/50 iron-ore venture in Australia, which will save the pair about $10bn. But state-owned Chinalco is not happy with the deal's collapse, and press speculation suggests ties between the Australian and Chinese governments could be strained by the news.
What was the reaction?
Other than Chinalco, most seem delighted with this latest twist. Rio shareholders had been unhappy about the initial deal; many pushed to reopen negotiations with BHP. Also, Australian politicians are pleased a key plank of its industry is not being 'sold off' to China. Shares in Rio and BHP rose more than ten per cent on Friday when the tie-up was announced.
Who are the PR players?
The collapse of the Chinalco deal will be a blow to Maitland and FD; both were working for the Chinese firm to help push through the deal. Finsbury was working on it from Rio's point of view, but it will now promote the BHP tie-up and help its bumper rights issue. Brunswick and Smithfield are retained by BHP.
What happens next?
The Chinalco deal required significant comms work to convince regulators, shareholders and the media that it made business sense; the argument, in retrospect, was never fully won. The BHP Billiton deal is far less controversial. Interestingly, it raises the prospect of a full merger between the two companies again - an entirely different prospect to convince stakeholders of its merits.
$19.5bn - The amount Rio Tinto turned down from Chinalco.