A company resolutely off the radar screen of most Americans, BHP Billiton is not only one of the top firms by value in the world. The company and its youthful CEO Marius Kloppers have lately been at the center of the representative dramas of the world economy in the current age.
His effort three years ago to merge his mining giant with fellow Anglo-Australian firm Rio Tinto was ultimately shelved by the financial crash, but his plan was also stiffly opposed by his primary customer, China.
His second try, aimed at merging just the iron ore resources of the two companies, eventually received the coup de grace from European regulators, but China again was a determined foe.
Mr. Kloppers's latest deal was vetoed last week by the Canadian government. That deal involved a hostile bid for PotashCorp, the world's biggest producer of mineral fertilizer, whose huge customer is—you guessed it—China.
Mr. Kloppers might seem to be bidding to replace Jennifer Aniston on Us Weekly's next "Why they can't find love" cover. Such is the gripe of certain stock analysts about his record of pouring money and time into relationships that don't pan out. Perhaps the real theme of the critique, though, should be his apparent fierce clinging to the premises of globalization—a belief that the world's economic life will and should be reorganized by the imperatives of profit-seeking firms operating in a free and open global marketplace.
Mr. Kloppers, you see, is a bit of a revolutionary. He may have failed in his pursuit of Rio Tinto, but he succeeded in reshaping how iron ore is traded in global markets. Kaput is the old practice of ore producers sitting down with quasi-cartels of national steelmakers and hammering out an annual "benchmark price"[#msg-48543418]. Over the objections of China, he imposed a system more transparently based on spot market prices.
Mr. Kloppers let slip a similar agenda early in his pursuit of Potash, suggesting the miner under BHP's ownership would no longer have truck with Canada's export cartel, Canpotex. Potash is the cartel's senior member and is said often to run its mines at 50% of capacity or even less to create headroom for Canada's smaller operators to remain profitably in business.
Mr. Kloppers straightforwardly said BHP would do things differently. BHP's "baseline demeanor," he said, is to be the low-cost producer, run its assets flat out, and take whatever is the market price for its commodity.
His candor did not serve him well. China, the big buyer, prefers pricing in a smoke-filled room, where it can try to duck the high and volatile prices that its own surging demand creates for everyone else. Equally happy with the present system is Saskatchewan Premier Brad Wall, whose budget not only is dependent on potash royalties, but under a formula that scales more generously with profits than with volume.
Mr. Wall's province is an important one to Canada's ruling Conservatives; public opinion was running strongly against the deal. So it wasn't a surprise when the national government in Ottawa last week invoked a little-used power to nix the proposed tie-up on grounds that it offers no "net benefit" for Canada.
One lesson here is that though governments everywhere rail against cartels, they have a soft spot for resource cartels (think OPEC). The new normal of a global commodity marketplace where China is the source of marginal demand may be a prolonged and uncertain tussle between transparent markets and closed-door corporatism.
Up in the air also is the fate of Mr. Kloppers. Some have begun to look on him as damaged goods, or at least someone like Ms. Aniston with whom any merger is likely to be more than usually fraught. BHP would not like the world to think BHP is good at proposing flashy deals but can't get one done.
Yet this may be a tad unfair to Mr. Kloppers. He is blamed in the Potash matter for misjudging the importance of Canadian regional politics. He is criticized for failing adequately to romance the politician Mr. Wall. All this would probably have been beside the point, though, if he had made an offer rich enough to bestir Potash's institutional shareholders and its fundamentally American management to be enthused about selling the company.
He didn't, and they weren't at the price he was offering. Mr. Kloppers's defeats are at least partly due to his unwillingness to overpay to get a deal done. In that sense, his shareholders have one reason to be satisfied with his performance. A week after the Potash deal was nixed, the company's stock price is flirting with an all-time high.‹
Market Data 
Markets 
AI
