The Guardian May 16, 2001


BHP-Billiton merger wobbles as opposition mounts

by Peter Mac

Seven unions involved in BHP Australian and New Zealand operations have 
announced their opposition to the proposed merger of Australia's largest 
corporation with the British/South African minerals giant, Billiton.

They have joined a growing list of organisations opposed to the deal. 
Institutional investors in BHP, including superannuation fund managers, are 
becoming increasingly uneasy about accepting the merger proposal.

The so-called merger looks more like a reverse takeover  the smaller 
company and its CEO taking over the larger BHP, with the terms appearing to 
favour the Billiton board and its shareholders.

Why would the BHP board recommend such a deal?

It is anticipated that within the next 20 years around five large 
transnational corporations will monopolise the mining and minerals 
processing industries. To survive it is necessary to become much bigger.

BHP is also faced with the likelihood of massive losses from the 
acquisition of unprofitable overseas resource companies, as well as a large 
bill for rectifying the vast pollution from its New Guinea Ok Tedi mine and 
compensating local inhabitants.

The company's massive $838 million March quarter profit this year will be 
almost entirely wiped out by losses on its Venezuelan iron ore processing 
plant.

The BHP Board hired its current Chief Executive, Paul Anderson, to put BHP 
on a stronger and more profitable footing and ensure its survival. 
Anderson's solution involved boosting BHP's most profitable operations 
(i.e. its mining, oil and gas extraction and aluminium processing), to sell 
off its less profitable steel making operations, and become bigger by 
takeovers and mergers.

In practice, the Billiton/BHP "merger" would represent a takeover of BHP by 
Billiton. Nobody believes the claims that the new company's headquarters 
will remain in Melbourne. BHP is more likely to become the Australian 
division of a mega-transnational company with headquarters in London.

It has already been announced that if the deal goes ahead Billiton's 
aggressive chief executive officer, Brian Gilbertson, would assume full 
control of the new company when BHP's current CEO, Paul Anderson, departs 
in 18 months" time.

In the mean time, Anderson would retain the secondary role of organising 
certain strategic and financial aspects of the new company's operations and 
disposing of what remains of BHP's steel-making division.

Anderson is set to leave the company with millions of dollars in rewards 
for disposing of the steel division and other restructuring.

Although the Howard Government has recently raised some limp-wristed 
objections to the proposed acquisition of a controlling interest in 
Woodside Petroleum by foreign owned Shell Oil, it is unlikely to oppose the 
directors of BHP regarding its proposed merger with Billiton.

BHP shareholders are concerned with the lack of detailed information about 
the long-term implications of the deal, and two weeks ago the Australian 
Securities and Investment Commission forced BHP to issue more information 
about the proposal to its shareholders.

The assessment of each company's assets is widely believed to be weighted 
in favour of Billiton, and bonuses are known to have been allocated for 
Billiton executives to the tune of $141 million if the deal goes ahead.

It would appear that the BHP directors may have been persuaded not only to 
accept an unrealistically low valuation for BHP shares in the conglomerate, 
but also to pay Billiton executives handsomely for the privilege of ripping 
off BHP shareholders by so doing. BHP's employees and the trade unions 
involved in the company's operations have no illusions about the future 
that awaits them if the deal goes through.

In recent years BHP has been in the forefront of companies attempting to 
force their employees to enter into individual work contracts and to 
thereby break their unions.

Billiton is no better, having an atrocious record with regard to its 
employees in South Africa.

BHP has made it perfectly clear that it intends to dispense with its steel 
making operations, and the merger of the two companies is certain to result 
in mass retrenchments, the attempted enforcement of individual contracts 
and the intensification of the exploitation of employees.

Next Friday's annual general meeting of BHP promises to be particularly 
exciting, with mass demonstrations of unions and supporters outside the 
meeting, and pointed questions about the "national interest" being thrown 
at the Board members by angry shareholders inside.

And the nation will watch as the fate of "the Big Australian", for many 
years the cornerstone of our heavy industry and the dominant power in our 
industrial history for more than 115 years, is determined.

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