repeat-bhp billiton ceo quit in row over big deal

REPEAT-BHP Billiton CEO quit in row over big deal -source
(Adds details, background, shares)

By Mark Bendeich

LONDON, Jan 13 (Reuters) - The former boss of global mining giant BHP Billiton Ltd/Plc quit after proposing a major international transaction that could have meant a change to the chairmanship, a source close to the company said on Monday.

Though details of the proposed deal, dubbed "Project Six", are still shrouded in secrecy, the source said it had been under discussion internally for several months and Chairman Don Argus finally moved against Chief Executive Brian Gilbertson last week after it became clear the chairmanship was at ADVERTISEMENT

stake.

"A lot of people in the company think Argus should explain the extent to which Project Six and in particular his potential removal from the chairmanship really lay behind his move against Gilbertson," the source said.

BHP Billiton (LSE: BLT.L - news - msgs) , which has cited unspecified "irreconcilable differences" with the board for Gilbertson's shock departure, described the source's allegations as speculation, but declined to confirm or deny them.

"For a company of our size we are always looking at different opportunities and we are always in discussions with other parties worldwide and we don't comment on these things until we have something to announce," a spokeswoman said.

Some Australian media have said Gilbertson, an architect of the merger that created the firm 18 months ago, fell out with the board after drafting a "hit list" of potential merger partners, including some of the biggest mining and oil groups.

But the source said on Monday the proposal was for a "very significant, single transaction" which had been analysed by Gilbertson's eventual successor, former finance chief Chip Goodyear, and was due to go to the board in February.

A new UK-based non-executive director was to take up his seat at that next board meeting, perhaps giving Gilbertson another ally on the BHP-dominated board, the source said. John Buchanan, a former finance chief of oil giant BP Plc (LSE: BP.L - news - msgs) , joins the board as senior independent director, effective February 1.

The source said Argus, one of Australia's leading businessmen, suddenly called an emergency board meeting, held on the weekend before the announcement of Gilbertson's resignation on January 6, and arranged to fly over a top British labour lawyer to brief him before it convened.

"The meeting on Saturday was a stitch-up," the source said.

"Argus had already prepared the groundwork, even flying in one of the top labour lawyers from the UK before the meeting."


CLASH OF EGOS

The market was vaguely aware of friction between Argus and Gilbertson from the time the deal-making South African took over the chief executive's role six months ago, having arranged his succession to the top job in March 2001 when he brokered the $28 billion merger of Billiton with Australia's BHP.

But some London investors said they were unhappy with the group's explanation of Gilbertson's departure and were left wondering whether there had been a split between Gilbertson and Argus over strategy, not just management style.

The search for reasons fuelled speculation that Gilbertson had been proposing some sort of tie-up with Canada's Alcan , the world's second-largest aluminium producer, which was itself rumoured to be planning a bid for Billiton, a major aluminium producer, within days of the BHP-Billiton merger.

Alcan denied the speculation at the time.

Media reports have also suggested Gilbertson might have had in his sights Australia's Woodside Petroleum , Canada's biggest oil producer Imperial Oil , and U.S.-listed oil exploration and production firm Kerr-McGee .

"Gilbertson would have been looking at the possibility of a company-transforming type acquisition, and the board has seemingly decided that maybe the emphasis will be much more on the organic," said Deutsche Asset Management resources analyst Lawrence Grech. "Acquisitions of the scale that would create company transformation are less likely."

Graham Birch, London-based manager of Merrill Lynch World Mining Trust, said a single deal big enough to reshape the BHP Billiton business could well have involved one of the world's big oil giants but, ultimately, it was a matter of speculation.

Investors and analysts said BHP Billiton still had a strong growth profile even in the absence of major acquisitions, and they would not lose any sleep over Gilbertson's departure and the demise of his mysterious grand plan, Project Six.

"Frankly, all they need to do is to deliver the current strategy," said analyst Russell Skirrow, of Wall Street investment bank Merrill Lynch (NYSE: MER - news) .

BHP Billiton's London-listed shares closed on Monday at 330 pence. They have fallen just 1.7 percent since Gilbertson resigned, with even Gilbertson's supporters voicing confidence in his 44-year-old successor, Goodyear.