The world’s largest mining company BHP Billiton has scrapped its $66 billion offer for Rio Tinto Group, citing global markets turmoil.
BHP Chief Executive Officer Marius Kloppers said buying Rio would have increased his company's debt and it would have been difficult to sell assets.
The worst financial crisis since the Great Depression has stalled credit markets and cut demand for raw materials, slashing prices.
The European Commission had expressed concern that a combination of the companies might have limited competition in the iron ore market.
"We have concerns about the continued deterioration of the near term global economic conditions, the lack of any certainty as to the time it will take for conditions to improve and the risks that these issues imply for shareholder value," Don Argus, chairman of Melbourne-based BHP, said today in a statement to the Australian stock exchange.
BHP rose 106 pence, or 11 per cent, to 1,086 pence as of 8.23am in London trading. Rio fell 36 per cent to 1,577 pence, valuing the company at 28.4 billion pounds ($43.1 billion).
"BHP needs to focus on existing operations and I think going into an economic downturn they need to batten down the hatches and generate as much cash flow as they can," said Jason Teh, who helps manage the equivalent of $5.7 billion at Investors Mutual in Sydney. He holds BHP and Rio shares.