THE DISTILLERY: BHP's oversized shoes

BHP Billiton is too big, BHP Billiton's CEO, Marius Kloppers has had his third failed deal, where to next, oil, gold, uranium, buybacks? Life isn't easy when your are the biggest mining company in the world and in a small economy like Australia. No one likes you, regulators, governments and investors, especially the latter when you try to deal, spending large licks of money. The 2.5 per cent jump in the BHP share price yesterday tells us what the market really thought of the bid for Potash Corp of Canada. 'Thanks Canadian Government' seems to be the message from investors. It was a one issue morning for our jotters.

Fairfax's Ian Verrender argues the knockback means BHP Billiton is now too big: "Marius Kloppers has suffered the hat trick in his quest to take BHP Billiton to a new level, adding weight to the argument that the Big Australian may have become just a little too big for everyone's liking. Concerns by governments in China, Europe and the US about BHP's hostile takeover of Rio Tinto and later the proposed friendly merger of the pair's West Australian iron ore operations were understandable. Two of the world's three biggest iron ore producers joining forces was bound to have steelmakers across the globe up in arms. But the Canadian Government's interim decision to knock back BHP's $40 billion takeover of Potash Corp of Saskatchewan is a game changer."

Business Spectator's Stephen Bartholomeusz made a few pertinent points: "The Canadian government has damaged the reputation of Canada as an open economy committed to free flows of capital by rejecting BHP Billiton's proposed $US39 billion bid for Potash Corp. In the process it has created a major headache for BHP Billiton's Marius Kloppers, who has massive financial firepower that politicians and regulators are preventing him from deploying. While BHP Billiton's ambition of acquiring Potash Corp isn't quite dead – the Canadians have given it 30 days to make further representations and offer further undertakings – the decision announced by Canada's industry minister, Tony Clement, is going to be very difficult to reverse. Clement said he wasn't satisfied the takeover was likely to be of net benefit to Canada, the test in Canada's foreign investment regime. That's despite the fact that Potash Corp is majority foreign owned already, that BHP Billiton would have ultimately distributed more than $US40 billion to Potash Corp shareholders, would have spent $C12 billion developing its own Jansen potash project, would have provided thousands of new jobs and would have re-located the effective head office of Potash Corp from Chicago to Saskatchewan."

Fairfax's Ian McIlwraith commentary was typical of most efforts this morning: "If BHP cannot succeed in Canada, then the company has to look closely at what contributed to Kloppers' cropper. This is his third defeat at the hands of regulators/governments in substantially expanding BHP – both its ''hostile'' bid for fellow resources giant Rio Tinto, and the merger-lite option of an iron ore mining partnership in the Pilbara, have been knocked on the head by competition authorities."

The Australian's John Durie wrote yesterday: "The Canadian government has dealt a bitter blow to BHP Billiton boss Marius Kloppers. The rejection of his $US39 billion bid for Potash Corp marks the third defeat for BHP's expansion plans in as many attempts. BHP can attempt to overturn the decision and will be as confused as everyone else given this was only Canada's second rejection of a foreign takeover since it loosened regulation guiding foreign investment in 1985. It seems, after a string of takeovers, the Canadian government has drawn a line in the sand. Reality must be dawning on Kloppers that BHP is bordering on being too big, after two attempts to takeover Rio Tinto failed at the hands of anti-trust regulators." This morning Durie said: "BHP Billiton is still formally in the race for Potash but Canada's no to its offer means uranium, oil and gas may be its next growth options. Resumption of the $4 billion buyback suspended back in 2007, when the first Rio Tinto deal was mooted, is also high on the agenda. Politics works in wondrous ways and, while BHP wrapped the Australian government around its little finger in the mining tax wrangle, the Canadians haven't even attempted to be rational in their rejection of the Potash bid."

Fairfax's Elizabeth Knight said this morning: "The board and management of BHP Billiton are under renewed pressure from shareholders to abandon its large-scale acquisition agenda and undertake a buyback of its British listed shares to soak up the company's excess cash. It is fair to say that this push started well before the news from Canada yesterday that its government had rejected BHP's plans for a $40 billion acquisition of a local fertiliser company, Potash Corp. The majority of BHP Billiton's large shareholders did not see the merit of the deal and already believed a share buyback would be more beneficial to the company's share price." And The Australian Financial Review agreed: "BHP Billiton is facing renewed calls to return billions of dollars of cash to shareholders as it attempts to keep alive a hostile $US40 billion bid for Potash Corporation of Saskatchewan." And the paper also joined the chorus saying: "With the $US40 billion hostile bid for Potash Corporation of Saskatchewan on life support at best, BHP Billiton chief executive Marius Kloppers is in a tough spot."

The Australian's Bryan Frith says: "BHP may explore the oil and gas sector and that could raise the prospect of a tilt at Woodside. BHP used to own 40 per cent of Woodside but in 1990 committed a colossal blunder by selling 30 per cent and four years later disposed of the remainder. BHP has cast its eye over Woodside since, including in 2001, when the Howard government vetoed Shell's attempt to lift its stake in Woodside from 34 per cent to 56 per cent and control."

And The Australian's resident BHP expert, Matthew Stevens combined the many strands in this story: "Marius Kloppers' personal credibility crisis has been his shareholders' gain. While BHP's provisional failure to clear even the first substantive hurdle in its chase for Potash Corp of Saskatchewan raises obvious questions over the BHP executive's capacity to deliver on its necessary ambitions, investors went about rewarding management's disappointment with a still-developing rerating of the company. BHP's share price jumped 2.6 per cent both because the uncertainties of the Potash bid have been removed and because everyone is now betting, with pretty good reason, there will be the mother of all share buybacks."

And Fairfax's Elizabeth Knight was a busy scribbler, she also had a nice scoopette this morning: "Nick Falloon, the executive chairman of Ten Network, had been secretly working on a management buyout of the television network before James Packer pounced on 18 per cent of the shares in a lightning sharemarket raid last week. Mr Falloon, who has agreed to leave the company, was working with the US private equity investor Hellman & Friedman, which was to have financed the deal to take Ten private." So James Packer didn't spot the value in Ten, someone was there before him. And fellow Fairfaxian, the Insider, David Symons says: "Plans for a buyout of Ten might have been stymied, but Ten isn't the only asset available in the local TV industry. Both Falloon and Brian Powers, chairman of Hellman & Friedman, have a historical connection with PBL Media. Powers was chairman and chief executive of Publishing & Broadcasting Limited (as PBL was then known) between 1994 and 1998, before passing the chief executive's baton to Falloon. If Falloon's soon going to be freed from his responsibilities at Ten, he will have plenty of time to consider the appeal of a return to a Packer-less PBL, where current owner CVC Asia-Pacific is itching to exit the Australian media sector."