The end of this month looms as a crossroads for the world's biggest mining company, BHP Billiton, with speculation that the big Australian may be quietly planning to fulfil a long-held ambition to become one of the biggest global corporations across all sectors. This week the opportunity will re-emerge for the resources giant to make a renewed bid for the third-biggest global miner, the Anglo-Australian Rio Tinto. Transcript KERRY O'BRIEN, PRESENTER: For the world's biggest mining company, BHP Billiton, the end of this month looms as a crossroads, with speculation that the big Australian may be quietly planning fulfil a long-held ambition to become one of the biggest global corporations across all sectors. This week the opportunity will re-emerge for the resources giant to make a renewed bid for the third biggest global miner, the Anglo-Australian Rio Tinto. Tomorrow is the expiry date for a 12-month embargo under UK Corporations Law, imposed after BHP Billiton withdrew its $165 billion hostile takeover bid for Rio Tinto with the onset of the global financial crisis. A day after the embargo expiry date, BHP will hold its annual general meeting, the last to be hosted by veteran Chairman of BHP Billiton, Don Argus, who, it has emerged, scuttled a much earlier bid for Rio Tinto way back in 2002, orchestrating the dismissal of the chief executive who then proposed it. So, will BHP Billiton bid again for Rio Tinto? Business editor Greg Hoy reports.
BHP, massive in Australia, massive in the world. Rio Tinto being, you know, very large here as well. But the combination would be a world force.
GREG HOY, REPORTER: The big fella. In 126 years since it was founded at Broken Hill, the big Australian's market value has grown to $155 billion, 14 per cent of the capitalisation of the entire Australian stockmarket. With 99,000 employees or contractors in 25 countries, it's the world's biggest miner and 35th largest company.
DON ARGUS, CHAIRMAN, BHP BILLITON: It's beautifully geared, it's got a diversified range of commodities and it's a very strong balance sheet that probably produces more cash than most banks around the world now.
GREG HOY: But if BHP Billiton looms large over Australia, its diminutive chairman Don Argus has loomed larger over the big Australian itself for the past decade.
ROBERT MACKLIN, CO-AUTHOR, THE BIG FELLA: He's a plucky little Queenslander, a nuggetty patriot. He might have small stature, but he has a rather large ego.
DON ARGUS: If China's gonna play in the international markets, then it's got to understand what the international market rules are. If you're gonna play in this game, then you've gotta play with the big boys.
GREG HOY: A towering figure in Australian business who's lobbied governments to restrain investment in Australian resources by sovereign wealth funds, Don Argus would not be interviewed.
ROBERT MACKLIN: He is extraordinarily influential. He has in fact the capacity to influence policy right around the world. And this can be a good thing from Australia's point of view at certain times, and it can be much less of a good thing when we come to issues like climate change.
GREG HOY: But Robert Macklin, co-author of a recent and revealing book on the mining giant, was granted rare access to all of BHP Billiton's key decision makers.
ROBERT MACKLIN: What troubles me in terms of climate change is that he and his company have been very, very reluctant to accept the science, and during the time of the Howard Government, they were influential in having Howard decline to ratify Kyoto. And I think that was quite disgraceful.
GREG HOY: But now, in a changing of the guard, at home and abroad the farewells have begun for chairman Argus, the Don of BHP Billiton, or as he's fond of calling it, "the big fella".
MARIUS KLOPPERS, CEO, BHP BILLITON (Oct. 29): I would like to thank Don for his leadership as chairman over the past decade.
ROBERT MACKLIN: The company grew enormously and became extraordinarily profitable in that time. So, I think that he goes out with all flags flying.
MARIUS KLOPPERS: Don has been a truly inspirational leader. He's listened to management.
GREG HOY: But they don't call him, "Don't Argue Argus" for nothing. For starters, there's a skeleton for years buried in BHP Billiton's closet, since a 2002 board meeting here at the elegant Danesfield House near England's Henley-on-Thames, where then chief executive Brian Gilbertson unveiled Project Six, his code word for a plot to take over major rival Rio Tinto, which was then receptive to Gilbertson's proposal. But it was Don Argus who seemed hostile.
ROBERT MACKLIN: And I think it had every chance of success. But, Don Argus was one of the factors that prevented that taking place. Gilbertson thought it was a CEO's job to take these decisions and the board should follow. Don Argus felt that the board really had to either work in lock step or take the lead.
GREG HOY: Plus, Don Argus would have been replaced if the merger proceeded. Project Six was scuttled. Brian Gilbertson told by Don Argus he no longer had the support of the board.
CHRIS KIMBER, BELL POTTER SECURITIES: Brian Gilbertson was, you know, seen off for consorting with the enemy. You know, in hindsight probably seems a little bit harsh.
GREG HOY: But with the new CEO, BHP tried to take over Rio Tinto again just four years after Brian Gilbertson was dismissed in a purge led by Don Argus.
ROBERT MACKLIN: I think he had great regrets that the deal didn't go through then, and I think that was part of his motivation in staying on and giving Marius Kloppers fantastic backing to bring off his great ambition, which was to put the two companies together, to basically take over Rio Tinto.
MARIUS KLOPPERS (Oct. 29): This is a firm bid. It's the only bid that has been made, and it's a compelling bid.
GREG HOY: $100 million was spent on the second bid, which was interrupted by the global financial crisis, so BHP Billiton had to scuttle the takeover, opting instead for a joint venture with Rio Tinto in iron ore production in the Pilbara. This triggered a predictable storm of protest from international buyers, close scrutiny from international regulators and a lingering suspicion the joint venture proposal is just the thin edge of a big wedge.
CHRIS KIMBER: I still believe that just if you could get that approved, that one cherry on top of the pie, then I think the rest of it would be able to be approved as well.
ROBERT MACKLIN: And it may very well lead to on eventual takeover. In fact I wouldn't be surprised to see next year a lot of activity in that area. It's something that Marius Kloppers feels very, very strongly about.
MARIUS KLOPPERS (Oct. 29): Gives Rio Tinto shareholders greater comfort that they will be able to realise the compelling benefits offered by this combination.
GREG HOY: So should we brace for another bid by BHP Billiton for one of its major rivals. Many certainly think so. BHP Billiton says the company has a policy of not commenting on speculation regarding takeover moves, but under UK Corporations Law, a 12-month embargo on any third bid for Rio Tinto is about to expire, while the big Australian continues to trumpet its growth ambitions and has steadfastly maintained a sizeable war chest and a small debt level. Despite the smorgasbord of mining bargains drifting by in the debris of the global financial crisis.
DON ARGUS (Oct. 22): Your board believes that BHP Billiton is strongly positioned to continue to invest in the growth and to participate in opportunistic mergers and acquisitions.
CHRIS KIMBER: And they've got a massive war chest, but they couldn't find anything that suited them as well as Rio Tinto.
GREG HOY: Meantime, it's Sayonara Don Argus, the great patriot, the hard man of the big fella, who next week will chair his last annual general meeting. But as the accolades flow, the question must be asked: what if he'd allowed BHP Billiton's original bid for Rio Tinto to proceed seven years ago.
CHRIS KIMBER: I think that if the merger hadda gona ahead then, the two of them then working as one massive force in the world during the biggest resource boom that we've seen. So, look, I think a lot of wealth woulda been created in Australia and for Australians if they hadda merged far sooner.
KERRY O'BRIEN: Greg Hoy with that report.
RIO Price at posting:
$71.70 Sentiment: Hold Disclosure: Held
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