The credit crunch is so powerful that it has now crushed what would have been one of the biggest takeovers of all time.

BHP Billiton, the world's largest mining company, has abandoned its year-long pursuit of Rio Tinto, the No. 3 miner, blaming deteriorating credit markets and a slide in commodity prices.

When BHP announced its unsolicited offer, prices for iron ore, steel, and other hard commodities were soaring on demand from China, India, and other quickly industrializing nations. Rio Tinto's iron ore operations were the main prize for BHP.

At the time, the offer from BHP Billiton was valued at $147 billion—greater than the price of the 2000 America Online-Time Warner merger and second only to Vodafone's acquisition of Mannesmann in 1999.

But both commodity prices and stocks have retreated sharply since then as economies around the world have been hurt by the financial crisis. Copper prices, for one, have fallen by 50 percent in the last year. The BHP offer, which was rejected by Rio Tinto in February, was worth less than half its original value.

"We have previously said that similar cultures and the overlap of key assets and infrastructure make this a compelling combination, BHP's chief executive, Marius Kloppers, said today. "Recent global events and associated falls in commodity prices have, however, altered risk dimensions."

The current unforgiving state of the markets was another concern. BHP said it was willing to sell assets to gain approval for a deal from European Union regulators, but it would have had trouble finding a buyer willing to pay an adequate price given the difficulty in lining up financing.

And the huge debt held by Rio must have been given pause. Rio has some $38 billion of debt, most of it a result of its acquisition of Alcan last year. BHP has $6 billion in debt.

The prospect of refinancing is enough to terrify an iron giant.