BHP not giving up on deals, has no regrets

[miningmx.com] — GLOBAL miner BHP Billiton has not given up on large acquisitions and does not regret spending $875m pursuing three massive deals that failed over the past two years, its chairperson said on Tuesday.

Chairperson 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 $39bn bid for Potash Corp, the world’s top fertilizer maker, on Monday, after Canada blocked the deal. The miner said it would return $4.2bn 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 CEO Marius Kloppers, but his speech to shareholders expressed little regret.

He said BHP was unable to satisfy Ottawa with enough beyond $1bn-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 $12.5bn cash pile to investors through buybacks were disappointed.