After sitting dormant for more than a decade, BHP Group, Melbourne, once mining’s most aggressive dealmaker, is positioning itself for a return to large-scale M&A, according to a Bloomberg report.
BHP has expanded its dealmaking team, including in London, and is interested in pursuing a transformational deal, according to people familiar with the matter, who asked not to be identified discussing private information. The company is evaluating rivals including Freeport-McMoRan Inc., Vale SA, and Glencore Plc, they said, while emphasizing that there is no indication it is preparing any bids at this point.
The work is still early stages and predominantly focused internally rather than involving external advisers, sources said. Near-record-high valuations of some of its potential targets may also be a stumbling block, they added.
A mega deal would cap a series of sweeping changes at the world’s biggest miner since CEO Mike Henry took over in early 2020. The company is seeking to expand in metals that will be needed for the green-energy transition, and is in the process of exiting oil and gas while pouring billions of dollars into a giant new potash mine in Canada.
A plan to collapse BHP’s London listing – which BHP said will make it more “nimble” – was approved by shareholders Jan. 20.
In a separate Bloomberg report, New York analyst firm Gorden Haskett has suggested Nutrien Ltd., Saskatoon, as another BHP takeover target after a “peculiar” CEO change earlier this month (GM Jan. 7, p. 1). The surprise exit of Nutrien CEO Mayo Schmidt to start the year after only eight months on the job suggests the company is struggling with figuring out what it wants to do, Don Bilson, Head of Event-Driven Research, told Bloomberg.
“One would think the time is right for NTR’s board to consider its options,” the firm said in a note. “Obviously, NTR wouldn’t need to find a new CEO if it is sold, and it just so happens that a predator that tried to buy a big piece of NTR once before is looking again.”
Both BHP and Nutrien said they do not comment on speculation.
There were reports last summer that Nutrien and BHP were in talks over cooperation at BHP’s Jansen project in Saskatchewan (GM May 28, 2021). Analysts had speculated that the departure of Nutrien President and CEO Chuck Magro in April (GM April 23, 2021), a major critic of Jansen, “could open the door for an 11th hour deal between the two companies.” Incoming President and CEO Schmidt was more conciliatory, and his reference to BHP as being “disciplined” was seen as a “potash peace pipe.”
However, a 2021 deal was not forged, and BHP went on to announce in August that it would proceed with the US$5.7 million Jansen project (GM Aug. 20, 2021), and saying in September that it had a nonbinding agreement for 100 percent of Jansen’s production (GM Sept. 17, 2021).
BHP, comfortably the world’s biggest mining company, is no stranger to going after its biggest rivals. In 2008 it abandoned a hostile bid for Rio Tinto Group, the world’s second-biggest miner, that would have been the industry’s biggest-ever deal. It also failed in a pursuit of Nutrien legacy company Potash Corp. of Saskatchewan Inc. for over US$40 billion (GM Nov. 22, 2010).
Last month Canada’s former Industry Minister, Tony Clement, told the Australian Financial Review that a BHP-Nutrien deal is more likely today, as the focus is not on large deals and their impact, but on national security issues. “…And of course Australia is an ally and not an aggressive competitor, so I would hazard a guess that these things would be more likely today.”
Since the earlier acquisition attempt, BHP has strengthened its bonds with Canada, including the planned $5.7 billion spend on Jansen. In addition, CEO Henry and Chairman Ken MacKenzie were both born in Canada.
However, Scotia Bank’s Toronto-based analyst Ben Isaacson told the Review it would be hard for Canada to change its protectionist stance from 2010. He also believed that a Nutrien-BHP potash powerhouse would struggle to win international regulatory approval, noting that the PotashCorp-Agrium merger triggered antitrust regulatory review and required divestment to gain approval.