Comments on: So we won't have to say "BHP Billiton Rio Tinto" then…

By: Brian

Brian — Fri, 28 Nov 2008 14:30:13 +0000

Robert, I think it is very useful to highlight this well-established pattern which is almost invariably reflected in the share price movements as soon as a takeover is announced, often mysteriously before. Some stocks thought to be prone to takeover even have a “takeover premium” built into their price although no takeover is mooted.

Nevertheless the research you quote indicates that some mergers and takeovers succeed, so you still have to assess each case on its merits.

jo, Xstrata’s big move a few years ago was to take over MIM (Mt Isa Mines). My impression was that they got it at bargain prices because MIM’s management was good at digging stuff up but not all that good at running a business. There was a time when MIM was bigger than BHP.

On government reorganisation, I understand the worst way is the ‘salami slice’ approach because there is maximum demoralisation for minimum savings. Yet this is the approach used annually in the so-called ‘efficiency dividend’ typically exacted by governments annually.

By: jo

jo — Fri, 28 Nov 2008 01:43:02 +0000

I’d say this boom didn’t just cover up – it wrapped them in gold and silver and tin and nickel plated paper with diamond encrusted ribbons and a big titanium thank you card

However, I take your point and more so in respect of the public service where corporate managerial practices took hold for no good reason. Depts. have been utterly stuffed by outsourcing, ongoing restructuring and reforms etc – all of which imo, have and continue to hamper and weaken what were often straight forward service providers in the the good old days.

By: Robert Merkel

Robert Merkel — Fri, 28 Nov 2008 00:56:53 +0000

Jo: And there’s evidence to suggest that the shareholders of BHP would have been better of if they’d never bought Billiton. They did get lucky with WMC, though.

Booms cover up a lot of management sins.

By: jo

jo — Fri, 28 Nov 2008 00:07:55 +0000

Possibly this merger would have gone ahead Robert at a different time – the “mergers mostly fail line” is somewhat undercut by the fact that um, BHP and Billiton were only merged into BHPB – only how years ago, and they only finished swallowing up WMC – what 3/4 years ago? And the number of takeovers in the mining sector has been quite substantial – hasn’t Swiss miner Xstrata “merged” with quite a few small Oz miners in past 4/5 years etc. And the Rio takeover of Alcan last year etc. etc. All of this was occurring at the beginning and during a mega boom for resource companies of course.

Maybe this merger/takeover will live to fight another day as they just ain’t making any more of it – land that is – and what Rio have – I’m sure BHPB want and maybe besides all the implications of the global economic crisis, they also may be waiting to see what Obama is going to do with climate change.

Like you, I’m hoping, almost praying that the US comes on board in a big way, as only then can a global climate change framework finally get underway, and these changes will effect resource companies including their acquisition and all other plans.

By: danny

danny — Thu, 27 Nov 2008 23:02:55 +0000

GT: the 10 reasons notwithstanding, and youse being forgiven for predicting that outsourcing couldn’t possibly deliver a worse result, did it in fact turn out that you would have been better with the devil you, that the outsourcing was to no net good purpose except enriching the insourcers?
It’s happened that way before, ad nauseum.

By: paul walter

paul walter — Wed, 26 Nov 2008 02:15:29 +0000

Since RIO shares dropped forty percent on the announcement, wonder who did and didn’t make a killing.

By: GoTroppo

GoTroppo — Wed, 26 Nov 2008 00:57:41 +0000

Many years ago, the section I worked for in government announced it was going to outsource and gave a list of reasons why it needed to happen. They did this at a meeting with all staff and asked for questions at the end. It ended very quickly when one bright spark noted that, of the 10 reasons given (e.g. inability to retain staff, unable to keep up with changes in technology, etc) ALL of them were basically saying the same thing:

As a group, we are incapable of managing the requirements of the department, so we’ve decided to outsource.

Yet, as he rightly pointed out, all the management heads (who were “incapable of managing” us) were all keeping their jobs.

By: derrida derider

derrida derider — Wed, 26 Nov 2008 00:03:18 +0000

Anybody who has worked in a large organisation knows all this. But the problem is that what is in the organisation’s interests and what is in the managers’ (be they CEOs or Cabinet ministers) interests are different things.

Certainly in you hold shares in company that makes a takeover bid of any significance then take it as a sell signal. And you hold shares in a firm subject to a takeover bid only vote for it if payment is in hard cash, not scrip.