Resources giant BHP Billiton has withdrawn its offer, worth an estimated £44bn, for Rio Tinto over concerns about the continued deterioration of global economic conditions, stating the move was no longer in the best interests of its shareholders.

Shares in BHP Billiton rose more than 15% in early morning trading, rising to 1128p on the back of the news while shares in Rio have fallen by some 38%, with the price falling to 1513p as of 8:30am.

Marius Kloppers, BHP Billiton's CEO, said: "We have previously said that similar cultures and the overlap of key assets and infrastructure make this a compelling combination. Recent global events and associated falls in commodity prices have, however, altered risk dimensions. BHP Billiton is very focused on balance sheet strength. Accordingly, the greater debt exposure of the combination plus the difficulty of divesting assets have increased the risks to shareholder value to an unacceptable level."

The European Commission (EC) was due to rule in the New Year concerning the merger and BHP said it was calling for the company to sell off certain iron ore and coal businesses in order for the deal to be approved. In normal economic conditions BHP Billiton said it would have been prepared to agree to such suggestions, which it believed would have been both acceptable and manageable.

However, given the current economic circumstances and uncertainty regarding BHP’s ability to achieve fair divestment values at this time, these remedies would contribute to the cost and risk of the transaction, Kloppers said. As it does not intend to make such sales, BHP expects the EC will not clear the deal. However, even if EC approval was received without these concessions, BHP said it intends to recommend its shareholders vote against it.

The group said it will have to write down some $450m incurred in pursuing this matter over the past 18 months in its December 2008 half year results.

Morningstar and Hemscott are now one company. You can see the original version of this article on Hemscott.com.