Ken MacKenzie prefers to be below the radar. The elusive chair of BHP, who apparently is having a 50-foot motor cruiser constructed on Victoria’s Mornington Peninsula, has been invisible throughout a daring $64 billion bid for rival Anglo American. He needs the limelight as a substitute to be on his chief govt Mike Henry, because it ought to. In the previous, larger-than-life BHP chairmen have dominated and overshadowed their chief executives. That MacKenzie has a restrained ego is admirable. Yet make no mistake, this mega-deal, if it comes off, is as a lot MacKenzie’s as it’s Henry’s.
The deal, to date, has been rebuffed twice by Anglo’s board and administration, who this week revealed their very own radical restructuring plan. Investors are ready to see if BHP makes a 3rd tilt early subsequent week to safe the deal, by growing its all-share bid.
If it does, and is profitable, the deal guarantees to set BHP up for development over the subsequent two to 3 many years, positioning it as the dominant miner in copper and metallurgical coal manufacturing and making it the third largest in iron ore and nickel. It would additionally form MacKenzie and Henry’s legacies at the Big Australian.
“I can see why they’re going after the Anglo deal,” says Graeme Liebelt, a former Orica chief govt, who now chairs Amcor, and has labored with MacKenzie. “Having been in the mining industry myself, and seeing where things are headed with copper, you can see the strategic rationale.
“Mike Henry has a very good reputation, and Ken is very careful about these things. They would have thought it through thoroughly and will not be surprised by initial knock backs. But it is a complicated deal, it’s asking Anglo shareholders to take on a fair bit of risk. So, it’s going to be very challenging but maybe not impossible.”
The world’s greatest producers of copper, reminiscent of BHP, are eager to develop their footprint to make the most of rising demand for the metallic that’s being utilized in the manufacture of inexperienced vitality grid infrastructure, from photo voltaic panels to wind farms, and additionally at information centres and in electrical automobiles, like the Tesla that the 60-year-old MacKenzie drives.
Although MacKenzie, who initially hails from Canada, and speaks French and some German, is thought to be extra into boats than automobiles. He raced Lasers in nationwide competitions in Canada in his youth incomes him medals, and is having a motor cruiser constructed.
MacKenzie’s friends describe him as having certainly one of the most formidable minds in enterprise. He earned a fame as a shrewd dealmaker, adept at brokering acquisitions and reworking companies, in addition to demonstrating strict management on capital spending, whereas working for 3 many years at Amcor. There he rose to turn into its chief govt, and was tasked with fixing the world packaging firm after an inglorious cartel scandal.
“He hit the ground running,” recollects Chris Roberts, who was Amcor’s chair when MacKenzie was appointed CEO. “He took us through a whole series of what he called a ‘Get Fit’ program, which really meant getting rid of businesses we had around the place that were not working and really focusing on where we could grow. We expanded by acquisition largely over the next 10 years or so. He was outstanding.”
Liebelt, who succeeded Roberts as Amcor’s chair, agrees. He factors to the 2009 deal when Amcor paid $2.4 billion to Rio Tinto for its Alcan packaging property, which made it then the largest group globally in pharmaceutical and healthcare packaging. Amcor manufactures packaging gadgets as various as aluminium cans to lolly wrappers to cigarette cartons.
“Alcan was a carefully managed deal and the integration was very well done,” says Liebelt. “Amcor really learned something from how to do acquisitions from that point onwards. They took pains to make sure that the processes they put in place were repeatable, so they documented them, and did reviews. After that, when other acquisitions were done, and this still continues until this day, there’s a playbook for Amcor in making acquisitions.”
Graeme Liebelt, Amcor chair, who has labored with Ken MacKenzie, mentioned the Anglo deal can be “very challenging but maybe not impossible”. Credit: Julian Smith
Liebelt describes MacKenzie as having a robust values’ system, and additionally as charming. “He does the homework and the hard yards, putting the right processes in place, finding the right people. He’s tough and clear as to what he expects, and follows through to ensure that things are being delivered.”
MacKenzie’s efficiency at Amcor drew the consideration of BHP chair Jac Nasser, who tried to rent him to be the miner’s CEO, in keeping with individuals with information of the matter. MacKenzie declined.
Instead, he had his eye on one other prize: Nasser’s job. MacKenzie completed as Amcor’s CEO in April 2015, and joined BHP as a director in September 2016. A yr later he was chair of the mining group.
When MacKenzie changed Nasser the greatest downside dealing with BHP was shareholders’ scepticism at the firm’s capability to handle capital nicely, significantly when executing acquisitions – and for good purpose.
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BHP had burned nearly $US40 billion ($60 billion) on a disastrous foray buying and investing in shale oil and fuel in the US, which started below CEO Marius Kloppers in 2011. BHP would later write down tens of billions on these property, which might ultimately be offered for a fraction of what was paid on that ill-fated guess.
But it wasn’t simply that transaction that had shaken traders’ confidence. Successive administration and boards at BHP have a chequered historical past of merger and acquisitions. More than twenty years after BHP purchased South Africa’s Billiton in what was alleged to be a transformational transaction, debate continues to rage about how a lot worth was created and destroyed from that deal.
When BHP purchased WMC in the mid-2000s, administration and the board have been accused of paying an excessive amount of. And then there was administration’s misadventures in attempting to purchase Rio Tinto, not as soon as however twice, to strive and create a completely unassailable group. It price former BHP CEO Brian Gilbertson his job.
When MacKenzie grew to become BHP’s chair he went on a listening tour of main shareholders. His engagement was well-received and differed, some say, to his predecessor. “If you had a one-hour meeting with Jac Nasser, he would spend 57 minutes of that meeting talking,” recollects one BHP investor, who requested to not be named.
Geoff Healy, who was beforehand BHP’s chief authorized counsel and later chargeable for managing the firm’s fame and non-financial danger till the finish of 2020, mentioned MacKenzie had agency views however listening was a key energy.
Geoff Healy, BHP’s former prime lawyer, says: “BHP has needed growth and has wanted growth for a while now.”Credit: Steven Siewert
“He’s a clear thinker, a good listener, and has a unique capacity to see value, whether that’s in strategy, portfolio or capital allocation. He’s super disciplined in his execution. He’s also low-key.”
So low-key that MacKenzie declined to be interviewed. BHP’s administration and board are shunning interviews as they tip-toe round the UK Panel on Takeovers and Mergers. Still, MacKenzie’s reticence in the direction of media interviews existed nicely earlier than the Anglo deal.
Healy says when MacKenzie stepped into the BHP chair function he had clear views about the firm’s capital allocation framework and return on capital, and labored with administration and traders to ensure this was clear.
The framework focuses on investing in and extracting as a lot worth from current property, sustaining a robust stability sheet, paying out at the least 50 per cent of underlying revenue in dividends, and with extra capital utilizing it to both scale back debt, fund acquisitions, or undertake buybacks or pay greater dividends.
The capital allocation self-discipline is mirrored in BHP’s metrics. Last monetary yr its return on invested capital was 29 per cent. In distinction, Anglo American’s was in the single-digits.
After MacKenzie’s arrival at BHP, administration intensified their give attention to simplifying the portfolio and firm construction, whereas trying to find development – similar to what occurred at Amcor.
In 2018, BHP exited its US shale oil and fuel property. In 2020, months earlier than the pandemic struck, Mike Henry was appointed CEO, changing Andrew Mackenzie.
In 2021, BHP introduced it will collapse its dual-listed UK construction, consolidating into one firm integrated in Australia. It additionally deserted a bidding conflict for Canadian nickel miner Noront Resources.
In 2022, the miner merged its petroleum enterprise with Woodside. By 2023, it had exited a few of its Queensland metallurgical coal property that it owned collectively with Mitsubishi Development, in a deal value as much as $US4.1 billion. It’s had much less success divesting thermal coal property. That identical yr, it gave a inexperienced mild to spending practically $US5 billion on its Canadian potash operation.
BHP was additionally pursuing development that yr in metals, reminiscent of copper and nickel. It purchased Oz Minerals for $US6.4 billion.
“It’s been a busy couple of years at BHP,” MacKenzie drily noticed, in an interview with BHP’s media group final October.
BHP’s debt ranges now sit at $US11.2 billion, which places it in the direction of the prime finish of its $US15 billion internet debt ceiling cap.
In addition to his BHP function, MacKenzie has based a program for ASX-listed chief executives at the Melbourne Business School, which he chairs. He’s additionally an advisor with funding financial institution Barrenjoey.
The chairmanship of BHP is a robust one, which implies few individuals are keen to criticise the report of MacKenzie or the firm’s administration publicly.
However, one senior enterprise chief, who requested anonymity, made this commentary. “Look at the whole nickel debacle. It seems no one realised in Australian mining that the Indonesians were getting Chinese companies to help produce nickel and flood the market. Where was the analysis? Why didn’t we know?”
The Anglo deal has been pitched as BHP shopping for development, significantly in copper the place demand is about to outstrip provide in the subsequent decade. It would additionally provide vital synergies.
“Three of the largest copper producers are saying the copper price isn’t high enough. If that’s your conclusion, then clearly buying existing copper assets is a strategy that makes sense,” mentioned George Cheveley, a portfolio supervisor at UK institutional investor Ninety One, which owns £675.6 million ($1.3 billion), or simply over 2 per cent of Anglo. It additionally owns $665 million, or 0.3 per cent, of BHP shares.
“If you look at high-grade iron ore prices, met coal prices, which they would also get in this Anglo portfolio, there are pretty good arguments to say those long-term consensus prices are also too low.”
While Cheveley, who as soon as labored for BHP as an analyst, wouldn’t reveal if Ninety One supported BHP’s deal or Anglo’s proposed break-up, he did say the synergies in placing the two firms collectively have been “quite big” and the “fit was very good”.
A deal with Anglo would additionally handle the imbalance in BHP’s portfolio. After the demerger of its petroleum division and the Oz Minerals acquisition BHP’s portfolio remained structurally challenged. Its iron ore operations dwarfed its coal, copper and nickel companies.
The Anglo deal, the place BHP would purchase most of that group’s iron ore and copper property, whereas divesting of its platinum and diamond companies, would repair this. Though the deal’s sophisticated, multi-step construction makes it dangerous, as do the political and regulatory challenges.
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Geoff Healy isn’t stunned by BHP’s pursuit of Anglo. “BHP has needed growth and has wanted growth for a while now. What Mike and Ken have done, building on the work Andrew and Ken did, is to run the place safely, get the assets operating well, clean up the portfolio, simplify the corporate structure, and put down some growth bets. The narrative around Anglo is not that this is Mike or Ken’s deal.”
Others might beg to vary. But for Healy, it’s a far less complicated proposition. “It’s just that they would have looked at this period and said it’s the right time, we’ve set the place up to be ready for it.”