The Big Australian is playing hardball with shareholders in WMC Resources, telling them to accept the $7.85 a share cash takeover bid by this Friday or risk a tumbling share price if the bid lapses because less than 50% of the company has changed hands. The details of BHP’s threat are here.

It’s true that WMC shares could tumble below $7 if the bid lapses, but the fact remains that the WMC and BHP boards have got together and conspired to give the Howard government an estimated $600 million tax windfall for the 2004-05 financial year.

No wonder WMC shareholders are holding out. Collectively they’ll be sharing in an estimated $3 billion in capital gains and BHP has steadfastly refused to offer a scrip alternative which would allow this tax liability to be rolled over. Even worse, WMC shareholders will incur the CGT liability in the current financial year because BHP is stubbornly refusing to extend beyond 30 June.

If the WMC board was genuinely interested in the wellbeing of its shareholders in after-tax terms, it would at the very least be publicly calling on BHP to extend the bid into the next financial year. Instead this has now been expressly ruled out.

You can only wonder what discussions have taken place between John Howard and his mate, BHP-Billiton chairman Don Argus, the former NAB CEO who bankrolled the Liberal Party through much of the 1990s.

No other corporate takeover in history has created such a tax windfall for Canberra, yet it’s completely unnecessary because it was the Howard government which introduced the commendable CGT relief for scrip mergers and takeovers.

WMC shareholders should make their own decision, but it should be from an after-tax perspective and many of them probably feel inclined to tell the extremely arrogant and inflexible BHP-Billiton to get stuffed. If the world’s biggest miner really wants WMC it can come back with a scrip offer or, at the very least, make a new cash only offer in the 2005-06 financial year.

Since when do corporates act to maximise tax payments to Canberra, which is already sitting on record revenues thanks to the China boom and record company profits from the likes of BHP Billiton and WMC Resources?