KEY POINTS:
Rio Tinto Group chief executive Tom Albanese cost investors almost US$50 billion ($91.6 billion) when he repelled BHP Billiton's bid to make the world's largest mining acquisition.
As commodities prices plunge amid a global recession and Rio struggles with US$38.9 billion in debt, shareholders say Albanese should have been more open to a deal.
London-based Rio has fallen 38 per cent since BHP withdrew its bid on November 25, making it the worst performing stock in the 14-member Bloomberg Europe Metals & Mining Index since that date. BHP advanced 26 per cent.
"I don't know the Rio board that well, but they should be asking some questions," said Tim Barker, who helps manage more than US$54 billion of assets, including BHP and Rio shares, at BT Financial Group in Sydney. "I wouldn't want to be in Albanese's shoes."
Albanese, a third-generation Italian-American, on Wednesday unveiled a plan to eliminate 14,000 jobs, reduce spending on new projects by US$5 billion and consider joint ventures in an effort to pare its debt.
The cuts are the cost of Albanese's successful year-long opposition to a takeover by BHP and his decision to buy Canada's Alcan for US$38.1 billion last year.
BHP said it abandoned the takeover bid because Rio's debt, regulatory hurdles and falling commodity prices made the deal too risky.
At yesterday's market prices, BHP's offer for Rio would be worth US$82.9 billion, or US$49.2 billion more than Rio's current market value of US$33.7 billion.
Albanese, 51, defended his decision not to meet BHP CEO Marius Kloppers to discuss the offer. "I don't think it would have changed the outcome," he said.
"These are periods that you don't enjoy at the time and they are very hard decisions to make," Albanese said. "They are not necessarily popular decisions to make, but they are the right decisions."
Albanese has his defenders. "No company wants to make major changes at the moment, and Rio is no different," said Ian Henderson at JPMorgan Chase.
Others aren't as forgiving. "Management has got to be blamed," said Albert Hung, who manages A$1.2 billion ($790 million) at Alleron Investment Management in Sydney.
- BLOOMBERG
