BHP Billiton, number-one global miner, said Thursday it proposed to buyout fellow miner Rio Tinto, who in turn rejected the idea. "BHP Billiton now confirms that it recently wrote to the board of Rio Tinto outlining a proposal in relation to a potential combination with Rio Tinto on terms incorporating a premium, reflecting its confidence in the benefits for both sets of shareholders of such a transaction. In preparing its proposal, BHP Billiton has examined in detail the regulatory issues and other practicalities of a combination," the company said. No price was mentioned. "Rio Tinto rejected the proposal. BHP Billiton has again written to Rio Tinto and intends to continue to seek an opportunity to meet and discuss its proposal with Rio Tinto." A merger between $220B BHP and $121B Rio would create a global miner that could exert strong control over the markets of many industrial commodities such as aluminum, iron ore, copper and coal -- raising the question of serious regulatory concerns. "There would be regulatory hurdles. In copper, aluminum and coal, as well as iron ore, they may be bumping up against what is allowable... The steel mills in particular would be up in arms," an Australian analyst said. It was first rumored in March that BHP would make a hostile bid for Rio, which was denied by both companies. In September, rumors emerged that BHP and Brazilian miner CVRD were considering a joint bid for Rio (full story). Rio Tinto shares jumped 18.6% while BHP was up 7.7% in London trading.
Commentary: Iron Ore Prices Seen Rising 30% in 2008 • 10 Steel and Iron Stocks to Strengthen Your Portfolio • What Does Rio Tinto's Takeover of Alcan Mean for the Rest of the Industry?
Stocks to watch: RTP, BHP. Competitors: RIO, AA, AAUK. ETFs: SLX
Earnings call transcript: BHP Billiton Ltd. Annual Fiscal 2007
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