News

November 28, 2008

The Outcome Of The Proposed Bid By BHP Billiton For Rio Tinto Had An Air Of Inevitability About It

By Charles Wyatt

So the BHP Billiton offer to acquire Rio Tinto has at last been aborted, but not before costing BHP Billiton the sum of US$450 million. It would be a fair guess to say that Rio Tinto had to spend a slightly smaller sum, say US$300 million, in defending itself, but that is only part of it. Add in the unquantifiable costs to both companies of senior executives taking their eyes off the ball of running their divisions for a whole year while they devoted themselves to the proposed merger, and you can probably double these figures to a total of US$1.5 billion. A staggering figure this, which can only be seen as a testament to the unbridled ambitions of Marius Kloppers, chief executive of BHP Billiton, who wanted to be king of the mining world. Just to put it in context this sum is four times the total profits earned by all the junior mining companies listed on Aim over the last 10 years.

It was the EU regulators who wielded the axe in the end, and it is amazing that Mr Kloppers and his advisors did not see this coming ages ago. After all, the original bid was made a year ago, following a rash of rumours during the preceding months. But a little knowledge of history could have saved all that time and money for both companies. Back in 1952 the European Coal and Steel Community was set up following on from the Schuman Plan which was laid out in 1950 and takes its name from the...