29 Jun 2008
According to Richard Adkerson, “I don’t have a poker face. People can sit in a room and know how I feel about things.”
His straightforward approach and strong work ethic – the byproducts of growing up in small-town America – are the main reasons Adkerson, 61, sits in the corner office at Freeport-McMoRan after pulling off a stunning $26bn acquisition of larger US rival Phelps Dodge last year.
That deal immediately gave the company a portfolio of mines in Arizona, New Mexico, Colorado, Peru, Chile and Africa to position alongside its crown jewel – the vast Grasberg mine in Indonesia.
It also served as a prelude to the major consolidation trend in mining that continues this year on record prices for gold, copper and other metals. BHP Billiton threatens to eclipse the size of the Freeport-Phelps deal with an offer to buy Rio Tinto for $147.4bn. And Vale is weighing an offer for Xstrata which could more than triple the value of the Phelps deal.
Since the Phelps deal closed in March of 2007, bullish markets for Freeport’s copper, gold and other mining byproducts sparked a 77 percent increase in its stock price to $99 a share – a huge jump from the $17 value on the stock five years ago. It’s a track record his peers applaud.
“I have a lot of admiration for how he runs his business and how he’s created value over the years,” said Tom Albanese, Chief Executive of Rio Tinto, who has worked with Adkerson since the two companies formed a joint venture in 1995.
“He is a very effective businessman, and the results certainly demonstrate that,” Albanese told Reuters.
Record price fuel deals
The takeover thrust in mining is driven by commodity supply shortages, which have mixed with strong demand to push prices to record highs. Adkerson, who began his career as an accountant with Arthur Andersen & Co, said these dynamics make consolidation “inevitable.”
“You have a situation where companies have generated so much cash through high commodity prices, and investment opportunities are limited,” he said in a measured Southern drawl, adding that a CEO with a merger mentality is a necessity.
“The days of having a manager who is totally technically oriented, who’s not versed in the financial marketplace … I don’t think you can be that way.”
The key to success at the negotiating table, Adkerson noted, is not allowing the smaller details to detract from sealing the deal. It’s a lesson he learned from James “Jim-Bob” Moffett, Freeport’s chairman, whom he has known for years.
“When you decide to do a deal, the most important thing is to get the deal done, not necessarily to trade for the best deal that is there,” he said. “You want to get the best terms you can, but too often people let deals get away from them.”
Winning the trust of the other side is key, Adkerson said. “I’ve found that if you’re up-front with people and honest, straightforward and candid, that you can gain people’s trust. Then you can find common ground.”
Adkerson’s skills in finding common ground were honed in his hometown in Mississippi. Whether studying mathematics or working in his parents’ store, playing high-school football with Elvis Presley’s cousins in Tupelo or as a national merit scholar at Mississippi State University (MSU), Adkerson’s psyche was steeped in America’s post-World War II promise of unlimited possibility.
His parents grew up on farms in west Tennessee and his father wound up managing department stores in small Southern towns.
“I think the first time I worked in a store, I was eight years old. I was part of that generation where the world was changing and there was an expectation and an opportunity for people to have higher paying jobs and higher paying standard of living than your parents,” the executive said.
“I’m right in there with George Bush and Bill Clinton and Jimmy Buffett … the first baby-boomers,” he said with a laugh.
He has stayed true to his humble beginnings, according to Bill Simmons, a retired accounting professor who taught Adkerson at Mississippi State, where the executive is now president of the University Foundation Board.
“If you ran into him, you wouldn’t think he had a dime. He’s just an ordinary guy who has not got a big head at all,” said Simmons, who called Adkerson his best student in a 39-year teaching career.
Starting as an accountant in the oil and gas business before landing a job with Freeport in 1989, Adkerson could hardly have imagined he would one day be involved in a multibillion-dollar deal involving mining giants. Or that, in just four years’ time, a global industrial building boom would push copper up to over $4 per pound, from 60 cents.
Having worked through the ups and downs of the oil and gas business from the 1970s and now the recent metals boom, he is reluctant to predict prices. “People were predicting $100 oil in 1979-80; then oil went to $10 a barrel,” he noted.
Adkerson, the father of three grown sons, has kept a home in New Orleans after the new company’s headquarters moved to Phoenix, Arizona, where he resides. The New Orleans house was the target of a protest in 2005 by environmentalists, who claim the company’s mines – particularly Grasberg – have damaged local communities and ecosystems.
The Grasberg complex in Indonesia, one of the world’s largest gold and copper mining operations, has also drawn controversy due to the share of revenue going to native Papuans and the legality of payments to Indonesian security forces who help guard the site.
Just like in negotiating a multibillion deal, Adkerson is keen to find common ground.
“In a lot of ways at the core of their views, I certainly do (share their views),” he said, adding that much of his free time is spent outdoors hiking, hunting and fishing. “So it may sound ironic that you’ve got a guy involved in the mining industry feeling that he wants to protect the environment.”
He said environmental issues were important to Freeport’s operations, not only the current effects of mining, but also dealing with the environmental consequences of operations from years ago.
“The challenge with these environmental groups is that while many people are well-intentioned, they either are emotionally driven or they don’t have the technical understanding of how management of environmental issues needs to be dealt with.”
Dealing with protests is part of the huge responsibility of heading a global mining company, Adkerson says. But when it comes to pressure, the CEO said that sitting at the helm of the metals giant still ranks behind playing centre for his high school football team in Mississippi – a state where football is “an obligation.”
“I made a bad snap (pass) one night and we lost the game, and it was the headline in the paper the next day. So that was great training,” he laughed.