Battle Over BHP Grows as Activist Targets Boardroom -- WSJ
June 09 2017 - 3:02AM
Dow Jones News
By Robb M. Stewart
MELBOURNE, Australia -- One of the activist investors targeting
BHP Billiton Ltd. for a sweeping overhaul is sounding out possible
candidates for a shake-up of the resources company's board.
Tribeca Investment Partners is holding private talks with a
number of people, believing a majority of BHP's 11-person board
oversaw some of the mining and energy company's missteps in recent
years but haven't been held responsible, said Craig Evans, a
portfolio manager at the Sydney-based hedge fund.
Angling for an overhaul of BHP's boardroom is timely given the
search under way for a successor to Jac Nasser, who plans to retire
as BHP's chairman in 2018 after eight years in the role. It also
marks the latest move by a shareholder openly pushing for
changes.
Tribeca last month joined Elliott Management Corp. in
criticizing BHP for destroying shareholder value, and called for
BHP to sell its U.S. onshore oil and gas assets and use the about
$10 billion it should be able to raise to return capital to
investors and invest in growth projects.
"The main thing for us is the board is constantly showing it
isn't aligned with shareholder interests (on) returns and it must
be addressed, " Mr. Evans said.
He said Tribeca has identified several individuals with
long-term experience in the industry at the board level and before
that as chief executives in the sector. He said the names of the
people wouldn't be disclosed until Tribeca had the opportunity to
discuss changes with the company or it had been rebuffed.
"We would like to see more mining and technical skills on the
current board," Tribeca investment analyst James Eginton said.
BHP declined to comment.
In April, after months of talks with BHP's management and board,
New York hedge fund Elliott went public with calls for BHP to spin
off its U.S. petroleum assets and restructure its dual listing
around a main listing in London. In May, the investment firm
managed by Paul Singer refined its attack by calling for an
independent review of the global oil and oil gas operations and
suggesting the company retain a main listing in Australia. An
Elliott spokesman declined to comment on BHP's board or whether it
would push for changes among the directors.
BHP has rejected Elliott's attack, arguing that collapsing its
dual structure would be too costly and that there was a good fit
between its mining and petroleum operations. Elliott has taken its
case directly to other shareholders in Australia and around the
world, while BHP's management has held talks with investors in
recent weeks following a presentation in Barcelona by CEO Andrew
Mackenzie. In that presentation, Mr. Mackenzie said a strategy of
cutting costs and unlocking latent production capacity would
significantly boost BHP's value.
There has long been concern over BHP's investment in oil and
gas, particularly after it invested billions of dollars in U.S.
shale assets at the height of the natural-gas boom. At the
conference in Spain, Mr. Mackenzie conceded the company had
mistimed the acquisitions and said the company had more recently
pivoted its focus toward conventional assets.
There may be support for broad changes at BHP, according to a
survey of sentiment among Australian shareholders. Asked if they
agreed with Elliott's view that major restructuring was warranted
to create greater value, almost half of 1,000 people surveyed said
yes, a poll by Global Proxy Solicitation and university-based
Melbourne Institute said. Still, about 36% agreed Mr. Mackenzie had
effectively handled Elliott's approach and fewer than 18%
disagreed.
Brett Paton, chairman of wealth-management firm Escala Partners,
which advises some of Australia's wealthiest families on their
investments, recently waded into the debate by urging clients to
question BHP's strategy and the makeup of its board. In a recent
letter to clients, Mr. Paton -- who was vice chairman at UBS Group
AG in Australia for 23 years -- said he sought to address the
culture at the resources company, and what he called an oversize
balance sheet that for decades has led to a company out of touch
with its investors.
In an interview, Mr. Paton questioned the credentials of BHP
board members and appointments who had overseen the destruction of
value at companies they had previously led. However, he said he
urged clients to push BHP to consider Ken MacKenzie as Mr. Nasser's
successor, if it looks within its ranks, given his success in
growing packaging company Amcor Ltd. through well-timed
acquisitions.
Mr. MacKenzie, currently a senior adviser at McKinsey & Co.
and formerly CEO and managing director for a decade at Amcor, was
appointed as a nonexecutive director at BHP last August.
Mr. Nasser was a director at BHP for three years before the
former Ford Motor Co. boss was appointed chairman. His predecessor,
Don Argus, was also on BHP's board for several years before
becoming chairman.
Write to Robb M. Stewart at robb.stewart@wsj.com
(END) Dow Jones Newswires
June 09, 2017 02:47 ET (06:47 GMT)
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