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Mining firms in Britain, Australia agree to merge

LONDON (N.Y. Times News Service) — BHP, the Australian mining company, agreed Sunday to merge with Billiton of Britain in a transaction that would create a mining company with a market value of $28 billion.

The combined company would leapfrog rivals like Anglo American, the South African company affiliated with the Oppenheimer family, and Rio Tinto of Melbourne, Australia, and would rival Alcoa of the United States.

With commodity prices at depressed levels and continuing to fall, mining companies have increasingly been relying on mergers and joint ventures to reduce risk and lower costs.

No shares will change hands under the terms of the deal, which requires the approval of shareholders and regulators. BHP shareholders will own 58 percent of the combined entity, while Billiton shareholders will own 42 percent.

The pooling-of-interests structure will allow BHP and Billiton to maintain a measure of independence. Shares of Billiton would continue to trade in London, while those of BHP would trade in Sydney. BHP's American depository receipts would still trade in New York.

Paul Anderson, chief executive of BHP, would head the new company, which would be based in Melbourne. Brian Gilbertson, Billiton's chairman and chief executive, would be deputy chief executive and succeed Anderson when he retires in 2002.

The new company, to be called BHP Billiton, would have combined sales of $18.6 billion and earnings before interest and taxes of $3.3 billion. The deal brings together BHP's leading position in iron ore and coal mining with Billiton's dominance in aluminum and chrome production.

To better focus on minerals and petroleum, BHP said it planned to spin off its steel business by the end of 2002.

"The companies balance each other well," Anderson said.

Gilbertson echoed that sentiment. "This merger brings together some of the world's finest mining, metals and energy assets," he said.