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Mining Mega-Merger Opposed: BHP Deal with Billiton is Flawed

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9 August, 2005ICEM News release No. 25/2001

Shareholders in mining multinational BHP should vote against a proposed merger with Billiton plc.

That is the call from seven unions representing most of BHP's Australian and New Zealand workers.

Launched at a press conference in Australia yesterday, the joint union lobby includes a "Vote No" letter to BHP shareholders and an advertising campaign in the press.

It is part of a groundswell of opposition to the merger deal. Corporate Governance International, which counsels large institutional investors, is understood to have advised rejection of the plan.

The proposed merger between UK-based Billiton and Australian-headquartered BHP will be put to BHP shareholders at an extraordinary general meeting in Melbourne on 18 May. If the deal went through, it would create the second-largest natural resources company in the world.

The unions say they have two main interests in the affair:

"Firstly, BHP's workforce is a major stakeholder in the company. Tens of thousands of Australians and New Zealanders - mostly union members - have laboured in BHP over the decades. These workers built the company and are entitled to know that any merger decisions are soundly-based, in our interests and that of the nation as a whole. Good business decisions enhance our security of employment. Poor decisions are inevitably paid for by the workforce as much as by shareholders. In the last decade, BHP workers have endured cost-cutting, retrenchments and work speed-ups to make up for losses sustained elsewhere.

"Secondly, many union members employed by BHP are shareholders in the company directly or via their savings in superannuation schemes and other investment vehicles. We are concerned that the merger proposal represents poor value for these investments in both the short and longer term."

They argue that the deal is poorly structured because:

- No independent report on the proposal has been released

- BHP assets have been undervalued relative to those of Billiton

- The merger proposal is earnings dilutive for BHP shareholders in the short term

- BHP shares may trade at a discount to Billiton shares after the merger

- Bonuses for top management cannot be voted on separately

- Board accountability for medium term outcomes is not adequate.


The seven unions are the Association of Professional Engineers, Scientists and Managers, Australia; the Australian Manufacturing Workers Union; the Australian Workers Union; the Communications, Electrical and Plumbing Union; the Construction, Forestry, Mining & Energy Union; the Maritime Union of Australia; and the New Zealand Engineering, Printing and Manufacturing Union.

At the global level, most of them are affiliated to the 20-million-strong International Federation of Chemical, Energy, Mine and General Workers' Unions (ICEM).

"We fully support the campaign by our Australian and New Zealand colleagues," said ICEM General Secretary Fred Higgs in Brussels today. "Workers are stakeholders. The BHP workers have every right to question this proposal, which could put the future of their company at risk. We wish them success in securing a 'No' vote."