BHP Billiton's CEO quits over clash with board
Dudley White and Jason Gale Bloomberg News Monday, January 6, 2003
MELBOURNE BHP Billiton shares fell 4 percent to 9.92 Australian dollars on the Australian Stock Exchange, their biggest slump since Aug. 6.
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Charles Goodyear, a 44-year-old American who was chief development officer, will immediately replace Gilbertson, a 59-year-old South African, the company said. Goodyear was chief financial officer of BHP Ltd. when the miner bought Billiton PLC for $11.6 billion in 2001, while Gilbertson was Billiton's chief executive.
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BHP Billiton shares fell as investors speculated that the rift might have been related to plans for $8.8 billion of cash that the company is expected to accumulate over the next two and a half years. The company, which is investing $10 billion in new projects, has not made an acquisition in 11 months even as rivals such as Anglo American PLC bought mines.
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"Gilbertson may have differed from the board in that he may have been more aggressive in getting out the checkbook," said Mark Pervan, senior resources analyst at Daiwa Securities SMBC.
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Goodyear, by contrast, is more likely to focus on internal growth, Pervan said.
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Gilbertson resigned after a special board meeting in Melbourne on Saturday because of differences in "style and approach," said a BHP Billiton spokesman, Michael Buzzard. BHP Billiton said that the resignation did not result from board concern about the company's financial performance and that it would not lead to a change in strategy.
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"It would be nice to understand what the irreconcilable differences were," said Gary Armor, a fund manager at AMP Henderson Global Investors.
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The board may have opted to increase earnings by developing current assets, clashing with Gilbertson's more aggressive approach, Armor said.
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"For some investors," said Pervan, the Daiwa analyst, "the jury has been out on Gilbertson and he has really had to prove himself."
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After taking over at BHP Billiton, Gilbertson focused on cutting $270 million of costs from the Billiton transaction, as well as achieving a $500 million of savings by 2005. In the year before Billiton was acquired by BHP, Gilbertson spent $3.5 billion on acquisitions, including buying a majority stake in an alumina plant and purchasing Rio Algom Ltd.
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Last month, BHP Billiton said it would sell its stake in the iron ore producer Cia. Vale do Rio Doce for $343 million. The 2.1 percent shareholding was originally bought by Billiton. The sale will bolster BHP Billiton's cash for any potential alliance with WMC Resources Ltd. or Woodside Petroleum Ltd., Australia's second-largest oil company, the Australian Financial Review reported.
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Last year, BHP Billiton created an office of the chief executive amid speculation about discord involving Gilbertson, Anderson and the chairman, Don Argus. Tim Barker, a fund manager at Sagitta Wealth Management Ltd. in Sydney, said Gilbertson had had a history of independence. "The history of the companies that he has previously run shows he has been fairly autonomous," Barker said. "That had always been a bit of a concern."
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But Goodyear "has found very little in his position as chief development officer in terms of looking for new acquisitions or potential opportunities," Barker said. "He probably will develop the company from within in the short term." Goodyear joined Broken Hill Proprietary Co. in 1999 as chief financial officer. He was previously president of Goodyear Capital Corp. and chief financial officer of Freeport-McMoRan Inc.
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"Goodyear has the capital discipline required to manage BHP Billiton's stable, diversified earnings, and significant free cash flow," Mike Byrne, resources analyst at Goldman Sachs Group Inc. in Sydney, said in a report.
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BHP Billiton may have $8.8 billion of surplus capital by the end of fiscal 2005, Byrne said. BHP Billiton had $1.5 billion of cash on June 30. In October, BHP Billiton reported that first-quarter profit fell 9 percent because of weak commodity demand. Rivals Anglo and Rio do not report quarterly earnings.
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Gilbertson's departure, said a Standard Poor's report by Craig Parker, "indicates the integration of the former BHP Ltd. and Billiton PLC companies is still evolving, and if integration problems manifest, the rating outlook could revert to stable from positive."
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