BHP’s Anglo approach evokes memories of Billiton deal
BHP’s surprise bid for global mining giant Anglo American will evoke memories of its bold move 23 years ago to merge with another London-based mining major.
BHP’s surprise bid for London-based global mining giant Anglo American will evoke memories of its bold move 23 years ago to merge with another London-based global mining giant, Billiton.
That $US28bndeal, which was launched in 2001 by former chief executive Paul Anderson and chairman Don Argus and created the world’s largest mining company, was criticised by analysts who argued that The Big Australian was selling off the farm too cheaply.
One Australian critic described it as not just selling off the farm, but actually giving it away.
The deal saw BHP – then the third-largest iron ore producer, the largest exporter of metallurgical coal, a significant oil and gas producer and the world’s fourth-largest producer of copper – merge with Billiton: one of the world’s largest producers of aluminium, nickel, steaming coal and mineral sands.
Anderson hailed the deal as “groundbreaking” and a “sensational fit” which would give the group “an exceptional breadth of assets and capabilities”.
While the Australian government insisted that BHP Billiton’s headquarters remain in Melbourne, the deal saw the creation of a complicated dual-listed company structure with the Australian BHP Billiton listed on the ASX and the British BHP Billiton Plc listed in London, each with separate shareholder groups.
While the global headquarters of the company technically remained in Melbourne, the headquarters of BHP Billiton Plc were in London.
There was also criticism of$US71m in payouts to Billiton executives as excessive, including $10mfor Billiton chief executive Brian Gilbertson, who went on to run the combined group after Anderson stepped down in December 2002.
Six months later, Gilbertson was out the door in a surprise resignation, with BHP Billiton citing “irreconcilable differences” for his departure – a move which confirmed investor fears of the cultural differences between the two companies.
The combined company was regarded as overconfident, and having seen its Australian roots eroded, it seemed to be moving on to higher risk countries and expanding into less profitable mining sectors.
In 2014 the company announced plans to sell off many assets once held by Billiton, creating an independent global metals and mining company which included some of its aluminium, coal, manganese, nickel and silver assets.
This saw some of its assets in South Africa and South America spun off into a new company called South32 in 2015.
By 2017, with much of the former Billiton assets now sold, the company began rebranding itself as BHP, a move followed by the shift of its primarily listing back to the ASX in 2022.
News of the latest potential global mega-deal by BHP, now led by Canadian-born Mike Henry, was confirmed by Anglo American on Thursday after the story leaked out in the British media.
Anglo American described the bid as an “unsolicited, nonbinding and highly conditional combination proposal” by BHP, with the suitor later confirming its offer at £21bn ($40.5bn).
Under British law, BHP now has until May 22 to announce whether it has a firm intention to make a bid or be forced to walk away.
The potential merger with Anglo-American is the latest in a long history of bold bids by the BHP management of the day – each one heralded as providing unique opportunities for the company, each one promising to transform the mining company with a slightly different focus under a new chief executive.
Current boss Mike Henry, who took over the role in January 2020, has made much of his strategy to simplify the company. Since 2021 he has announced a string of deals, selling out of the company’s oil and gas assets and refocusing its holdings of coking coal to higher quality assets.
Perth-based gas company Woodside bought BHP’s oil and gas assets in 2021.
But Woodside’s chair, Richard Goyder, and chief executive, Meg O’Neill, faced strong criticism from shareholders and opposition from climate change protesters at its annual meeting in Perth on Wednesday, for not moving aggressively enough to decarbonise their operations.
Two decades of takeovers and asset disposals have seen BHP transform from a company involved in steel, petroleum, and gas to one more focused on minerals.
The bid for Anglo American is seen as a move to dramatically expand its production of copper, a mineral seen as having the potential to benefit significantly from the energy transition.
The company significantly expanded its mineral operations in Australia when it took over the company formerly known as Western Mining Resources in a $US7.3bn deal in 2005. This move gave it copper, gold, and uranium mining assets in South Australia and nickel operations in Western Australia and Queensland.
BHP’s management has been put on the back foot by the leaking of the news of its approach to Anglo American, emerging on the Anzac Day holiday in Australia.
Some sources saw it as a move by Anglo American to flush out a more attractive deal from BHP.
But it is difficult to judge if the bid will succeed.
While BHP management “pulled off” the deal with Billiton in 2001 with a lucrative offer, it also has a history of failure in several big bids.
A two-year hostile battle for control of rival iron ore miner, Rio Tinto, in 2007 and 2008 was eventually dropped by BHP management in the wake of the Global Financial Crisis.
There was another failure in 2010 – a $US40bn hostile takeover of Canada’s PotashCorp – after opposition from the Canadian government.
BHP shareholders now await news of the next step in the company’s long-running history of corporate deals.
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