The chance of BHP Billiton making another attempt to take over rival Rio Tinto after a bid ban expires later this month is less than 30 percent, Liberum Capital said on Tuesday.
BHP, the world's biggest mining company, scrapped its hostile all-share bid for Rio on November 25 2008, blaming sliding metals prices and the threat of global recession. It has to wait a year before it can rebid at a lower price under UK takeover regulations.
The stance of European regulators on a planned iron ore joint venture between the two companies will be key to whether BHP revives its takeover bid for Rio, Liberum Capital said in a note on Tuesday.
Liberum said the chance of a renewed bid over the next 12 months was less than 30 percent, but action by the European Commission might spur BHP to think again.
We think the probability of a re-bid is low, but not immaterial, it said.
A key reason BHP dropped its bid was that the Commission had required heavy divestments to allow the second and third biggest iron ore producers to join together, Liberum said. Selling off units would have been very difficult during the downturn.
Following the collapse of the bid, however, the two groups agreed to merge their iron ore operations in a joint venture, but marketing would be separate to head off anti-trust issues.
Steel companies who buy iron ore as a raw material are just as much opposed to the joint venture as they were to the full merger and if European regulators once again require divestments, that may spur BHP to revive its merger bid, Liberum said.
The regulatory view is crucial to the probability of a re-bid. If the EU are hawkish and want to block the JV unless there are merger type disposals the probability of a re-bid is fairly material in our view, the note said.
We are unable to rule out BHP coming back for Rio as the company is currently loaded with cash of $10.8 billion which potentially be used to sweeten the offer and / or repay Rio's debt after the merger.
(Reporting by Eric Onstad; Editing by Erica Billingham)