With commodity prices sagging in line with global growth, BHP Billiton’s mammoth, unsolicited bid for rival Rio Tinto might seem a lot less threatening. Certainly the price of the deal has a lot less wow in it, having fallen from $170 billion to under $70 billion in just a few short months. And in a few days, efforts to put the deal together will be one year old. Happy birthday.

Japan, woefully devoid of such resources, is home to two of the world’s biggest steel companies. Nippon Steel and JFE Holdings account for 6 percent of global steel output. The Nikkei business daily reports the country is stepping up pressure to block the deal.

The paper said Japan’s vice minister for international affairs at the trade and industry ministry will urge the European Commission to join it in blocking the merger, though a ministry official said there were no plans to make such a request.

It might seem petty to stir things up with global commodity prices in retreat. But unlike other industrial metals like copper, iron ore prices are not softening much. Analysts we polled said prices are likely to remain flat or rise modestly in 2009 contract talks, after the stunning hike of up to 96.5 percent in 2008.

And Japan’s outdated competition law makes it hard for the country to take any meaningful action to block the deal on its own. Its competition regulators ordered BHP to submit information on its bid for Rio last month, but BHP has refused to look at the request.

The EU commission has set a Jan. 15 deadline for making a final ruling on the deal, which has already been cleared by Australian and U.S. competition regulators. BHP’s share price is down 35 percent this year, and Rio’s is off 47 percent. By next year, the merger may be looking even less like a mighty move towards a monopoly and more like a necessity.

Deals of the day:

* Foster’s Group, the world’s second-largest wine group, said it has yet to receive any proposals on its wine business, whose future it is reviewing.

* U.S. private equity firm Ripplewood Holdings was picked as the favored bidder for the purchase of South Korea’s Daewoo Electronics from its creditors, leading creditor Woori Bank said.

* Sumitomo Mitsui Financial, Japan’s third-largest bank, is in talks to buy around a 2 percent stake in South Korea’s KB Financial for about 20 billion yen ($201.8 million), a person familiar with the matter said.

* Norwegian oilfield services group Sevan Marine said it was in talks with potential investors in its Sevan Drilling unit.

* Singapore sovereign wealth fund Temasek Holdings has agreed to a further investment of up to 12 billion rupees ($147 million) in Pakistan’s NIB Bank via a rights issue, NIB said.

When at first you don’t succeed to fail, just wait for the banks. After Huntsman took rival Hexion Specialty Chemicals to court to force them to make good on their $6.5 billion acquisition, it’s the banks that are now trying to shut the door.
 
Hexion and its parent Apollo Management went to court to kill the deal in June, arguing that the combined company would be insolvent. Huntsman countersued, but the insolvency argument has caught hold at Credit Suisse and Deutsche, the banks behind the deal. Insolvency, it turns out, is not a good business for banks, ranking somewhere below reckless real estate lending and buying complex credit derivatives on the advice of rating agencies. Banks, facing big losses on the deal, figured it was better to pay the lawyers. The banks had agreed to accept a solvency opinion from either party or an independent body. That’s what they got, but they are still balking.
 
This morning, Hexion said it strongly disagreed with the banks decision. Given they were ordered by the Delaware court to do everything they could to make the deal happen, they were bound to be outraged by their banks failure to commit. Secretly satisfied, perhaps, but publically unhappy nonetheless. 
 
Still out there is Huntsman’s countersuit, which alleges that Hexion scared off another bidder, and the Delaware court never specifically ruled on what the banks had to do to make the deal happen. And the two sides seem to be talking so there is reason to expect this thing to tick on yet for a while. Stepping back a bit, a $700 billion bailout package is being doled out to try to get banks back to the business of lending. Whether or not they will have to prove the solvency of the businesses to lend to is naturally a matter for… the courts?

Deals of the day:

* British gas producer BG Group launched a A$5.6 billion ($3.4 billion) friendly takeover bid for Australia’s Queensland Gas, its latest effort to boost its position in Asia’s fast-growing natural gas market.

* Victoria Oil & Gas said it paid about $400,000 for an option to buy Cypriot oil explorer Falcon Petroleum, which has substantial exploration prospects in Ethiopia and Mali.

* Intel Capital, the investment arm of Intel Corp, announced three investments in Chinese companies, including its first moves into the nation’s clean technology sector.