[Bhpbilliton] What will the world's biggest miner do now?

[Andy Whitmore]

I'm sure many of us on the list have been following the fall-out from 
the failed Potash bid (just in time for the Australian AGM). A few 
journalists, with the company, have recently been mulling over whether 
they are now just too big to take over anything else & what happens 
next. The following are some of those articles, with a short intro by 
our UK-based colleague Roger Moody....

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With a double failure to make a stock market killing in as many months, 
the world’s biggest mining company is nursing its wounds.

But – almost alone among senior mining companies - BHP Billiton now 
“suffers”, not from lack of money to keep itself in premier position, 
but having too much of the green stuff.

It could now pay more to its shareholders (good news for those who hold 
shares in order to lobby the company at its business meetings! :-))

More likely it will go for yet another acquisition (or acquisitions) but 
a less “testy” one than those recently attempted with Potash Corp and 
Rio Tinto .

According to a columnist for Australia’s Business Spectator: “[T]he only 
obvious sector where BHP Billiton could expand by large-scale 
acquisition is in oil and gas”.

About time then that climate change activists in the UK and Australia 
finally acknowledge BHP Billiton’s major, long-standing role, in 
exploiting these fossil fuels.

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BHP withdraws PotashCorp bid, reactivates shares buy-back

Saying it can't satisfy Investment Canada's demands, BHP has withdrawn 
its US$39 billion bid for PotashCorp.

Author: Dorothy Kosich
Posted: Monday , 15 Nov 2010

RENO, NV -

As Canada's Ministry of Industry commended BHP Billiton's "good faith 
and integrity" following the miner's decision to withdraw its US$39 
billion bid for Potash Corporation of Saskatchewan, Tony Clement 
stressed Sunday Canada still welcomes foreign investment.

Sunday afternoon PDT, BHP announced it had withdrawn its US$139 per 
share offer after determining "that the condition of its offer relating 
to receipt of a net benefit determination by the Minister of Industry 
under the Investment Canada Act cannot be satisfied."

The company stressed that its offer "would have resulted in a 
significant net benefit to Canada, Saskatchewan and New Brunswick. As a 
package, the proposed undertakings offered by BHP Billiton in a signed, 
written submission to the Ministry of Industry were unparalleled in 
substance, scope and duration."

BHP argued its offer would have increased employment, guaranteed 
investment, and established the company's global potash headquarters in 
Saskatoon. The investment would have included US$450 million on 
exploration and development over the next five years over and above 
money allocated for the Jansen project. An additional $370 million would 
have been spent on infrastructure funds in Saskatchewan and New 
Brunswick. BHP would have also applied for a TSX listing.

The company said it would have foregone tax benefits and was prepared to 
remain a member of the marketing arm for potash, Canpotex, for the next 
five year. BHP had also pledged to maintain operating employment at 
PotashCorp mines at the current level, and increased overall employment 
by 15%.

BHP pledged to spend at least US$8 million yearly on community programs 
in Saskatchewan and New Brunswick, which would have raised PotashCorp's 
current spending on community programs. The Australian mega-miner had 
also offered to create a Mining Centre of Excellence to enhance the 
province's mining capabilities.

While BHP CEO Marius Kloppers stressed that company remains committed to 
Canada and will develop a significant presence in Saskatchewan's potash 
industry, BHP announced it would reactivate the remaining US$4.2 billion 
of a previously suspended $13 billion buy-back program.

PotashCorp issued a statement Sunday evening, stressing the withdrawal 
of the hostile bid by BHP "underscores the PotashCorp's Board of 
Directors' unanimous belief that the BHP Billiton offer substantially 
undervalued PotashCorp and failed to reflect both the value of our 
premier position in a strategically vital industry and our future growth 
prospects."

However, the BHP bid went unchallenged in terms of a rival bid although 
rumors at one point claimed Chinese companies were seriously considering 
bidding for PotashCorp.

What ultimately stymied the BHP bid was the united opposition of 
Saskatchewan provincial officials, which helped convince Canada's 
Industry Ministry Tony Clement to block the deal, which turned out to be 
the nation's only second rejection of a foreign takeover in the past 25 
years. However, Canadian officials were still wincing from Brazilian 
miner Vale's takeover of Inco, who had promised much to Vale's Canadian 
employees, but instead have spent considerable time embroiled in 
protracted labor strikes.

Under the Investment Canada Act, the federal government can veto any 
transaction value at Cdn$299 million or more if it does not provide a 
net benefit to the country, based on jobs, production and other factors.

Credit Agricole SA analyst Mark Connelly told Bloomberg News that it was 
the way BHP approached both PotashCorp and the Canadian government that 
killed the deal. "They turned this into a political issue by being so 
outright hostile to Canada."

The loss of PotashCorp is the second major hostile takeover bid lost by 
BHP since South African Kloppers was appointed CEO in 2007. He dropped 
his hostile bid for Rio Tinto in 2008 and was forced to abandon a 
proposed iron ore joint venture with Rio last month.

During the Asia Pacific Economic Cooperation forum in Yokohama, Japan, 
Canadian Prime Minister Stephen Harper Sunday defended his 
administration's decision to reject the BHP application.

Industry Minister Clement said BHP absolutely demanded more details on 
his decision.

Harper said Australian Prime Minister Julia Gillard had raised the issue 
at a private meeting she had with him at the summit of leaders at the 
Asia Pacific Economic Cooperation forum.

Harper said his government will soon explain its decision as well as 
give "broader guidance to the investment community on the kind of 
foreign investment it is and is not seeking in Canada." The prime 
minister said the law prevents him from talking about the Nov. 3 BHP 
decision until 30 days after it was made.

"It would be... an interesting question to ask whether any other country 
would approve a similar transaction," Harper said. "The fact of the 
matter is that, even with this decision, Canada has one of the most open 
investment regimes in the world."
BHP's distressingly deep pockets

Stephen Bartholomeusz

Busiess Spectator



15 Nov 2010



BHP Billiton’s decision to "voluntarily" withdraw its bid for Potash 
Corp reflects its acceptance of the reality that, while there was a 
30-day period during which the Canadian Government’s blocking of the bid 
could be reviewed, the offer was dead and needed to be buried. There was 
no prospect of the Canadians changing their stance.

In the process of announcing the withdrawal, however, BHP Billiton went 
to great lengths to detail the concessions it had made to the government 
to try to win clearance for the $US39 billion takeover. It was an 
exhaustive and expensive list, which will add to the damage already done 
to Canada’s reputation as an open economy.

Presumably BHP felt obliged to detail its undertakings in order to 
justify the bid and its cost to its shareholders and demonstrate the 
lengths to which it had tried to get it across the line. A by-product of 
the disclosures is that Canada’s rejection looks even more protectionist 
and a demonstration of economic nationalism.

BHP Billiton describes the undertakings it proffered as ‘’unparalleled 
in substance, scope and duration’’ and it is difficult to disagree. It 
had offered to spend $US450 million on exploration and development over 
the next five years, beyond any spending on its own Jansen potash 
project. It also promised to spend $US370 million on infrastructure 
funds in Saskatchewan and New Brunswick.

It undertook to forego tax benefits it would have been entitled to under 
Canada’s taxation laws and committed to remaining a member of Canada’s 
potash cartel, Canpotex, for five years.

It would have relocated more than 200 head office jobs to Canada, 
maintained employment at current levels for five years and increased 
employment at the enlarged operations by 15 per cent. Another $8 million 
a year would have been spent on community programs, a centre for mining 
excellence would have been established at the University of Saskatchewan.

It says it was also prepared to accept an "unprecedented" monitoring and 
compliance program to assure the government that its undertakings were 
being complied with – including offering a $US250 million performance bond.

It is pretty obvious that nothing BHP Billiton could offer was going to 
win it approval for a decision so politically charged for a minority 
government reliant on 13 conservatives in Saskatchewan who were 
vehemently opposed to the bid. BHP Billiton needed to put the episode – 
and the $US350 million the aborted bid has cost it – behind it.

It will now push on with its massive Jansen project, which outside 
Canpotex has the capacity to eventually be very disruptive for Potash 
Corp and the potash cartels.

It will also reactivate its buy-back program, where there is $US4.2 
billion left of the original $US13 billion earmarked for capital reductions.

Despite the buyback and plans to invest $US15 billion in its existing 
businesses this year the failure of the Potash Corp campaign has created 
a massive dilemma for BHP Billiton, with cash pouring through the group 
faster than it can sensibly deploy it within the existing portfolio.

It could simply continue to return capital to shareholders, but that 
would mean it wasn’t maximising its exposure to a generational boom in 
resources.

Pushing the button on what could be a $US20 billion-plus expansion of 
its Olympic Dam copper-gold-uranium project could absorb a significant 
slab of capital but in the near term the only obvious sector where BHP 
Billiton could expand by large-scale acquisition is in oil and gas.

Given the setbacks with its twin attempts to do a deal with Rio Tinto 
and the Potash Corp failure any future acquisition will need to be 
agreed with the target and locked up.

The failures of the bid for Rio Tinto (which BHP Billiton withdrew as 
the financial crisis developed), the attempted iron ore production joint 
venture (withdrawn in the face of the regulatory objections) and now the 
Potash Corp offer may not have been due to anything within BHP 
Billiton’s control but it would damage its credibility if there were 
another costly failed attempt to expand.

It probably won’t rush into anything for similar reasons – it wouldn’t 
want the market to regard it as erratic and desperate to expand for 
expansion’s sake – but as the torrents of cash continue to pour through 
the group the pressure to deploy them sensibly and add to the diverse 
collection of tier one resource assets already within the portfolio will 
continue to mount.

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BHP still in the hunt for big acquisitions

The transnational miner says it has yet to give up on large acquisitions 
and does not regret the $875m spent trying to close such deals over the 
last two years

Sonali Paul and Rebekah Kebede, Reuters - 
http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=115189&sn=Detail&pid=92730

16 November 2010

PERTH, Australia - Global miner BHP Billiton (BHP.AX: Quote) has not 
given up on large acquisitions and does not regret spending $875 million 
pursuing three massive deals that failed over the past two years, its 
chairman said on Tuesday.

Chairman Jac Nasser dismissed speculation the company would turn to 
smaller deals because it is too big to win regulatory approval for major 
takeovers.

"Our strategy is very clear, we're not about to change from transactions 
that potentially involve tier 1 assets ... and change that to go after 
second tier, lower quality acquisitions," he told shareholders at the 
group's annual meeting in the Australian city of Perth.

"Don't look to us to be chasing smaller acquisitions of lower quality."

BHP withdrew a $39 billion bid for Potash Corp (POT.TO: Quote), the 
world's top fertiliser maker, on Monday, after Canada blocked the deal. 
The miner said it would return $4.2 billion to shareholders through a 
share buyback instead.

That followed BHP's decision a month earlier to scrap an iron ore joint 
venture with Rio Tinto after running into competition concerns in 
Europe, Australia and Asia. It also abandoned a full takeover of Rio 
Tinto in 2008.

"While we invested time and money in pursuing each opportunity, we 
continue to believe that the potential returns outweighed the risk of 
not being in the position to proceed," Nasser said.

COMMITTED TO JANSEN POTASH

The Potash Corp deal marked the third failed deal under Chief Executive 
Marius Kloppers, but his speech to shareholders expressed little regret.

He said BHP was unable to satisfy Ottawa with enough beyond $1 
billion-plus in commitments the company gave to win approval for the deal.

"We believe that the reasons provided by the minister for industry for 
his interim decision would have required undertakings that would have 
been adverse to our strategy and counter to creating shareholder value," 
Kloppers said.

One of Ottawa's main concerns was that BHP may delay development of its 
massive Jansen potash project in Saskatchewan province if it succeeded 
in taking over Potash Corp.

BHP told the government it would make a final investment decision in 
2012, but that was not good enough.

"We have said all along that we plan to develop a significant presence 
in the potash industry, and this remains true today," Kloppers told 
shareholders, adding BHP would continue evaluating Jansen and other 
development opportunities in the province.

Shareholders hoping BHP would return more of its $12.5 billion cash pile 
to investors through buybacks were disappointed.

Nasser said BHP always considered capital management, but made no 
promises to return more cash to shareholders, with the company 
continuing to focus first on investing in its own growth projects and 
acquisitions.

"We always look to invest in our business, that's our top priority," he 
told shareholders.

"You can be assured that our strategy hasn't changed and our philosophy 
around capital management hasn't changed."

Retail shareholders backed Kloppers' acquisition ambitions, but said 
they were starting to worry about the money that has gone down the drain.

"I'm very happy with Kloppers. But I'm a bit disappointed with the 
amount of money being spent on failed acquisitions," said John Black, a 
long-time BHP shareholder before going into the meeting.

BHP shares rose 0.5 percent to A$44.35 in a flat broader market . 
(Reporting by Sonali Paul and Rebekah Kebede; Editing by Balazs Koranyi 
and Dean Yates)