RPT-BREAKINGVIEWS-BHP can turn M&A exclusion to its advantage

By Antony Currie

MELBOURNE, Jan 13 (Reuters Breakingviews) - Mike Henry really wants to cement his tenure atop BHP BHP.AX with a big deal. Yet with multiple media reports suggesting his six years as CEO may come to a close in 2026, he has little to show for it. He has failed twice to bag preferred partner Anglo American AAL.L. And he's not interested in fighting Rio Tinto RIO.AX for Glencore, Reuters reported on Monday, citing sources. Yet this self-inflicted M&A exclusion may work in the $160 billion mining company's favour.

Staying away from Glencore GLEN.L looks like the right move. Henry would probably have to pay a big premium to wrest it away from Rio, but he'd be unlikely to find the same cost synergies in the Switzerland-based firm's Australian coal mines as he saw in Anglo's. And he prefers the latter's copper assets. Having stuck to his financial discipline to justify giving up on that target, he'd be foolish to abandon it for what he considers a lesser prize.

Moreover, Henry - or his successor - can take advantage of major rivals' dealmaking distractions. Anglo is already tied up with its pending merger with Teck Resources TECKb.TO. And were a Rio takeover of Glencore to happen, those executives would be bogged down on everything from securing approvals from multiple countries to working out whether to keep or sell assets, not least coal and trading.

That would buy BHP time. For one, Ross McEwan, former CEO of National Australia Bank NAB.AX, has been chair for less than a year. Rather than rushing a deal, he'd have more breathing room to work out Henry's future and successor - and to bed in any new boss and team.

BHP can also develop its own copper mines. It has already boosted production of the red metal by 28% over its three most recent financial years, in part due to Henry's $6 billion purchase of Oz Minerals. Meanwhile, assets it bought in Argentina 18 months ago are among the largest copper deposit discoveries of recent decades. These projects may take years but can take some pressure off the perceived need to bulk up by M&A.

A couple of years down the road, Anglo, having completed its merger with Teck, could be back on the menu. The $25 billion copper specialist First Quantum Minerals FM.TO could be another option, assuming its legal issues in Panama are resolved in the interim, though U.S.-based rival Freeport-McMoRan FCX.N looks harder to do, given the current White House's America First policies.

The key for BHP, though, would be to be better prepared to succeed.

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CONTEXT NEWS

BHP has no plans to launch a counterbid against Rio Tinto for Glencore, Reuters reported on January 12, citing two people familiar with the matter.