(Reuters) – Rio Tinto (RIO.L) sacked chief executive Tom Albanese on Thursday and revealed a $14 billion writedown in connection with his two most significant acquisitions, the Alcan aluminium group and Mozambican coal.
A heavyweight who joined the third-largest diversified miner two decades ago, Albanese will be replaced by iron ore boss Sam Walsh. Doug Ritchie, who led the acquisition of Mozambique-focused miner Riversdale, was also shown the door.
New Jersey-born, Alaska-trained Albanese had until now survived the consequences of his disastrous $38 billion acquisition of Alcan in 2007, a bruising top-of-the-market deal when Rio was under pressure from rivals to bulk up or be bought.
The deal, just two months after Albanese took the reins, turned bad as markets crumbled and aluminium prices slumped, battering Rio’s balance sheet, nearly forcing it into the arms of Chinese state-owned Chinalco and triggering a $15 billion rights issue. Rio has since seen years of losses in aluminium and taken billions in impairments – it had already taken an $8.9 billion charge on those struggling assets a year ago.
Walsh was welcomed by investors and analysts on Thursday as a safe pair of hands, but many also questioned whether a 63-year-old veteran would be a long-term solution, raising concerns over management at a group that also announced the departure of its chief financial officer last July.
“It’s another black mark in terms of (Albanese’s) M&A record and I suppose, given the magnitude of this writedown … I’m not surprised that he’s stepping down with this, nor am I surprised that Doug Ritchie is,” analyst Jeff Largey at Macquarie said.
Rio had planned to shrink the aluminium arm, cutting back one of the world’s largest producers of the metal by hiving off most of its Australian and New Zealand assets. But industry sources say it has not been mobbed by buyers.
Further damaging his reputation as a dealmaker, Albanese spearheaded a $4 billion deal to buy Mozambique-focused coal miner Riversdale in 2011, fighting off rival bidders. There, however, like many other miners in the region, Rio has struggled with the challenge of getting coal from pit to port.
Rail and port bottlenecks are the main headache for miners eager to cash in on Mozambique’s coal rush, but it could take a decade for many of the current infrastructure projects to come to fruition on a scale to meet industry demands.
“(Alcan) was always a bad deal, and Albanese was lucky not to carry the can for it back in 2008,” one of Rio Tinto’s 10 largest investors said. “Mozambique is more of a surprise, but the industry’s record on acquisitions is appalling, and Rio is not alone in destroying shareholder value.”
Anglo American (AAL.L) is facing potential writedowns linked to its Minas Rio iron ore acquisition in Brazil, a project set to cost more than three times initial estimates. BHP Billiton (BLT.L), meanwhile, failed to clinch three ambitious bids under its current boss – including two tilts at Rio – but then splashed out $17 billion on two shale gas takeovers in the United States just before gas prices slumped.
Like Albanese, BHP Chief Executive Marius Kloppers forfeited his bonus last year after BHP took a $2.8 billion charge on the value of its shale gas assets.
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