THE man behind this year’s largest takeover bid is not a habitual big spender.
“I guess until recently the most expensive thing I owned was my four-year-old
Nissan,” says Marius Kloppers, BHP Billiton’s chief executive, wondering
where this is leading.
Because he’s parsimonious? “We travel light,” he says in his clipped South
African English. You can almost hear the shrug.
It is a long-distance conversation, as befits Kloppers’s reputation among
London investors as something of an unknown quantity. He is in sunny
Australia. I am in grey old Britain. We are both on speakerphone because we
are both recording the conversation.
He has to, because every word he says, even in jest, could jeopardise BHP
Billiton’s £68 billion takeover bid for rival Rio Tinto.
I suspect he likes the challenge. Kloppers, just 45, has moved countries 11
times in a rapid career that has already taken him through two universities,
Insead business school, McKinsey and bottom to top of the mining sector.
That’s what he means by travelling light.
He is certainly a singular individual. Boyish, crew-cut, an Afrikaner by
birth, with an adopted black African daughter and two kids of his own, he
joined what became BHP Billiton 14 years ago, after spending nearly a decade
outside South Africa to avoid its troubles.
A chemical engineer by training, he rose quickly through operations and sales.
Two months ago he was made BHP Billiton chief executive, moving to its base
in Melbourne, Australia. He barely had his feet under the desk before, last
month, he launched that huge bid.
The speed of the move stunned stock markets round the world, and got
governments anxiously doing sums. BHP Billiton is already the world’s
largest miner – how much control would the new entity have over the world’s
resources? You get the sense that Kloppers, recently named by Fortune
magazine in its Top 25 most powerful bosses, doesn’t mess around.
But let’s get our terms straight. It’s not a bid yet; it’s a “proposal”, which
has already been rebuffed by the Rio Tinto board.
Kloppers spent much of last month travelling the world, visiting shareholders
and customers, explaining the thinking behind the move, which would offer
investors in both companies shares in the combined entity. He is still
quietly confident shareholders will embrace the logic of the proposed deal.
But from here, it looks deadlocked over value.
“The real proposition is that there is a substantial amount of value that you
can only get to when you put these two companies together,” counters
Kloppers. “It has nothing to do with the absolute value of the two
companies. It has everything to do with how much more these companies are
worth if you put the two together.”
Both companies have obvious synergies, both are dually listed in Australia and
Britain. “It’s 1+1=3,” he says. “Both companies have great growth pipelines,
but if you put them together it will be even better.”
Speaking from his home in Melbourne, Kloppers sounds anxious but firm. His
young family are outside, starting the Friday-night barbecue without him.
He chats more easily about nonbusiness matters, explaining the circumstances
of his eldest daughter Noni’s adoption. Kloppers was running an aluminium
smelter in rural Zululand – his first big job – when Noni’s mother asked if
he and his wife would adopt her child.
“She was poor, she could see we were going to move again and she said, ‘this
daughter is one you have to look after’. Noni still sees her mother
regularly.” He tells it straight, without sentiment. He credits his wife,
Carin, an artist by training, with the determination to make it work.
In business that same certainty of purpose has given Kloppers a daunting
reputation. Some say his intensity can intimidate. Others call him
ruthless.Kloppers doesn’t dismiss it. “I would use the word ‘focused’,” he
says.
He is certainly an expert in global manage-mentspeak. Answers on business are
carefully worded: liquidity, cashflow, baselines and pipelines pop up
repeatedly – you would expect nothing less from an Insead graduate, and the
agent of such an enormous takeover proposal.
But it is not, he makes plain, his idea alone. In fact, Kloppers is the third
BHP Billiton chief executive to have run the rule over Rio Tinto. His
affable predecessor, Chip Good-year, considered it. “But this transaction is
about delivering an integrated company and Chip had already done one,
welding BHP and Billiton together,” says Kloppers.
And the boss before that, Brian Gilbertson, is reputed to have argued with his
board about it – he wanted it, they didn’t. What’s changed? BHP Billiton’s
strength, for one.
“BHP Billiton has dramatically outper-formed Rio Tinto in the last seven
years, and that is principally because we have been better at growing the
company quickly,” says Kloppers.
That, he adds, is why the deal would be good for customers. “We will grow the
combined set of assets more quickly than the current set of owners . . . we
have got the skills, and because more opportunities exist if you put the two
together.”
Because you can push prices up? A combined group would control more than a
third of the world’s iron ore. No, says Kloppers, prices should fall.
“You have to make the assessment as to whether prices will be lower if you
produce more, or higher when two companies separately produce less. We are
the low-cost producer and the combined entity will be the low-cost producer
and will just produce stuff and accept the market price.”
Others might find that hard to swallow, but Kloppers says the reaction from
everyone he has seen has been positive. And both companies’ market
valuations back that up.
“If you look at the combined market cap of Rio Tinto and BHP Billiton after
the announcement, you see the market has already created tens of billions of
dollars of uplift, it believes in the industrial logic . . . we have always
believed that, and I would still say the reaction has been overwhelming.”
Except from its target. Rio Tinto’s chief executive, Tom Albanese, has not
been in touch. In fact Albanese spent last week rubbishing BHP’s record and
arguing strongly that its synergy claims were exaggerated.
Will Kloppers now make a formal bid, offering more money? Or go hostile?
He ducks the question. “Our proposal is to discuss what’s on the table. If you
look at the value created here, the market view is that, if these synergies
don’t materialise, these two companies won’t trade where they are at the
moment.”
So everyone will lose out. Hence his determination to sit tight. “We are
willing to talk to people until they have clarity on what this proposal
actually is,” he says. “But what is crucial is that whatever we do should
benefit both sets of shareholders, as both will be on the share register of
the combined company.”
And the workforce? The combined company would continue to have a head office
in Melbourne, he says, and though there would be redundancies, staff in
operations would be safe.
“Where duplication exists, we want to redeploy operations staff into new
growth. This is not a story about personnel redundancies.”
Kloppers sees himself as a grower, not a slasher. Born in Cape Town, the elder
of two brothers, his father an executive in financial services at Old
Mutual, he left South Africa on a Fulbright scholarship after two years’
conscription in the army.
It was only when the country started changing that he returned. Unhappy in a
job with McKinsey in the Netherlands, he touted himself to Gencor, the South
African mining group that later bought Billiton from Shell and split itself
in two, floating part under the Billiton name.
Kloppers’s formative experience was setting up the vast Hillside
aluminium smelter for Gencor in Zululand.
“We recruited a workforce that matched the demographic of the population –
65,000 applicants, 10,000 psychometric assessments, 5,000 interviews, just
over 1,000 people recruited, the first multicultural workforce in South
Africa from top to bottom . . . it was an incredible experience, against the
backdrop of South Africa changing.”
Later moves to sales and marketing gave him a taste for organisation. He was
part of the team that drove the merger of Billiton with BHP.
“The BHP-Billiton merger was an enormous experience, together with those early
years of starting something fresh. Those kinds of formative experiences
don’t come together in one career very easily, I would say.”
So will he walk away from Rio Tinto if it refuses to countenance his proposal?
He gives the textbook answer: BHP Billiton will stick to its knitting.
“We have a really great strategy which entails investing about $8 billion a
year in organic growth . . . our operations teams are executing on that
every day. If shareholders tell us they don’t want access to this pool of
synergies, which is considerable, we will continue executing our baseline
strategy.”
In other words, he travels light, BHP will move on. But he won’t want to start
his stint at the top with a failure.
MARIUS KLOPPERS’S WORKING DAY
THE BHP Billiton chief executive wakes at his house in Melbourne after 6am,
checks his e-mails and starts making calls, before having a leisurely
breakfast with his family.
Kloppers drops his kids at school, and is at BHP Billiton’s base by 9.30. Most
days are spent taking reports and communicating with stakeholders. “The most
important thing I do is make sure we have the right people in place. I’m
good at putting a team around me that can deliver.”
He returns home at 6.30pm, dines with his family, then works in his study from
9pm to 11pm. Much of his time is spent travelling.
VITAL STATISTICS
Born:August 26, 1962
Marital status:married, three children
School:Helpmekaar Boys High, Johannesburg
Universities:Pretoria, MIT, Insead
First job:corrosion coupon testing, Anglo American
Salary:$1.85m plus bonus
Home:Melbourne, Australia
Car:blue BMW series 1 hatchback
Favourite book:Glass Bead Game by Herman Hesse
Favourite music:Bob Dylan, Carole King
Favourite film:Evita
Favourite gadget:Blackberry
Last holiday:Shanghai
DOWNTIME
“I’m very boring,” says Marius Kloppers. “Basically I spend every moment
outside work doing things with my three kids. That could be barbecues, going
cycling or seeing a movie. All my time is spent with them.”
His wife organises everything to do with the home, leaving him to concentrate
on work. “Moving around as much as we do, she does everything, because
that’s how the roles are divided.”
Kloppers has no time to play sport, which he misses. “I’m more of a South
African cricket fan than rugby supporter – though it’s probably not a good
time to say it.”
