UPDATE 3-"No pain, no gain", BHP says after failed deals

Tue Nov 16, 2010 3:31am EST

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By Sonali Paul and Rebekah Kebede

PERTH, Australia, Nov 16 (Reuters) - Global miner BHP Billiton (BHP.AX) is still interested in big acquisitions and does not regret spending $875 million pursuing three major deals that collapsed in the past two years, its chairman said on Tuesday.

"For me, the juice is worth the squeeze on every one of those," Jac Nasser told reporters after BHP's annual shareholders meeting in the Australian city of Perth. "No pain, no gain."

Nasser was speaking a day after BHP withdrew a $39 billion bid for top fertiliser maker Potash Corp (POT.TO) after Canada blocked the offer.

BHP scrapped an iron ore joint venture with rival Rio Tinto (RIO.AX)(RIO.L) a month ago after running into competition concerns in Europe, Australia and Asia. It also abandoned a full takeover of Rio Tinto in 2008.

Nasser dismissed speculation BHP would turn to smaller deals because it is too big to win regulatory approval for major takeovers, and said top quality acquisitions were still available although he declined to name any.

"Don't look to us to be chasing smaller acquisitions of lower quality," he said. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For other BHP-Potash stories [ID:nSGE6AE01K] Special report on BHP's bid for Potash [ID:nN05288503] Newsmaker on BHP CEO Kloppers [ID:nSGE6A309J] Factbox on BHP's concessions to Canada [ID:nSGE6AE01V] Q+A on BHP's potash ambitions [ID:nSGE6A4065] BHP/Potash timeline: link.reuters.com/zew32q ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Far from being thrown to the lions, the BHP board got off lightly at the packed shareholder meeting. Chief Executive Marius Kloppers, at the helm during all three failed acquisitions, barely had to answer any questions as Nasser fended them all off.

Shareholders have continued to back Kloppers, 48.

In three-and-a-half hours of questions, the directors faced little heat about wasting shareholder funds and fielded only two or three polite queries about returning cash to shareholders and further acquisitions from the crowd of mostly senior citizens.

The rest of the grilling came from the usual cast of characters at a BHP annual meeting, featuring environmental and indigenous rights activists concerned about uranium mining and project development footprints.

BUYBACK OPTION OPEN

The miner said on Monday it would return $4.2 billion to shareholders through a share buyback, but shareholders hoping BHP would return more of its $12.5 billion cash pile to investors got no promises.

Nasser left open the possibility the board would consider increasing the buyback in February when it reviews the group's half-year results, but said the company was still focused on investing in projects and acquisitions first.

It expects to spend $15 billion a year on development projects.

"We always look to invest in our business, that's our top priority," Nasser told shareholders.

The Potash Corp bid marked the third failed deal under Kloppers, but his speech to shareholders expressed little regret.

He said BHP was unable to satisfy Ottawa with enough beyond $1 billion-plus in commitments the company gave to win approval for the deal.

He said shareholders should measure the success of a deal on whether it would create value or not.

"Winning is an easy game if you loosen the constraint of actually having to create value for your shareholders," a relaxed Kloppers told reporters after the meeting.

One of Ottawa's main concerns was that BHP may delay development of its massive Jansen potash project in Saskatchewan province if it succeeded in taking over Potash Corp.

Kloppers said the company remained committed to the project and would be in a position to make a final decision on whether to go ahead with the project in late 2011.

The key lesson from the abandoned deals was that regulators are scrutinising deals more closely, Nasser and Kloppers said.

"The world is changing, whether you want to call it protectionism or nationalism, but there is certainly a trend towards a more difficult process when you are looking at larger cross-border transactions," Nasser said.

Retail shareholders backed Kloppers' acquisition ambitions, but said they were starting to worry about the money that has gone down the drain.

"I'm very happy with Kloppers. But I'm a bit disappointed with the amount of money being spent on failed acquisitions," John Black, a long-time BHP shareholder said before going into the meeting.

BHP shares rose 0.5 percent to A$44.35 in a flat broader market .AXJO. (Reporting by Sonali Paul and Rebekah Kebede; Editing by Balazs Koranyi and Dean Yates)

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