BHP bid for Rio wins Australia regulator nod

By Sonali Paul

MELBOURNE (Reuters) - Miner BHP Billiton's (BHP.AX)(BLT.L) proposed $114 billion (64 billion pound) hostile bid for rival Rio Tinto (RIO.AX)(RIO.L) was cleared by Australia's competition watchdog on Wednesday, moving a step closer to clinching a deal first announced almost a year ago.

The decision by the Australian Competition and Consumer Commission sparked a 12 percent jump in Rio Tinto shares as investors gained confidence that a deal will eventually go ahead.

"For BHP it's one small step forward, rather than one step backward," said Peter Chilton, an analyst with Constellation Capital Management.

The two groups combined would be worth $220 billion, or nearly the same size as Microsoft (MSFT.O), dominating the mining landscape which has spawned several mergers over the past year, including Rio's $38 billion takeover of Alcan and the merger of Australian miners Oxiana and Zinifex to form Oz Minerals Ltd (OZL.AX).

The key hurdle for the takeover, which would be the world's second-largest behind Vodafone's (VOD.L) 2000 takeover of Mannesman, is approval from the European Commission.

The EC has flagged it is worried about the impact of surging commodity prices on manufacturers and consumers. Analysts said it was risky to assume the EC would now clear the deal.

"The EC will be focussing on very different issues and I'm sure European steel makers will be lobbying very strongly against the proposed merger," said Rob Craigie, an analyst with broker FW Holst. "The situation in Europe is very different from Australia and they have totally different customers and supply base."

"Certainly, the ACCC ruling is another tick in terms of BHP's bid process, but I would be cautious at extrapolating the ACCC approval to the European Commission's ruling next year."