BHP Billiton Will Discuss Activist's Single-Listing Proposal -- WSJ
February 21 2018 - 3:02AM
Dow Jones News
By Rhiannon Hoyle
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (February 21, 2018).
SYDNEY -- BHP Billiton Ltd., its net profit off 37%, signaled it
may be willing to yield to an activist investor's latest assault on
its corporate structure, even as it lifted its dividend 38%.
The world's top miner by market value attributed the fall in
half-year profit, to US$2.02 billion, to one-time charges from a
U.S. tax overhaul that has hit international companies. Stripping
out those charges, profit was up 25% to $4.05 billion.
BHP on Tuesday offered a clearer timetable for offloading its
U.S. shale business -- a disposal announced last August and notched
up as a victory by New York hedge fund Elliott Management Corp.,
which had questioned its fit with BHP's petroleum division and main
units that mine iron ore, copper and coal.
Elliott, battling BHP for a year, earlier this month launched a
fresh attack on its Sydney-London dual listing. Though BHP on
Tuesday defended the structure, Chief Executive Andrew Mackenzie
said he will discuss it over the next few weeks with investors --
including Elliott, scheduled to meet with him later this week.
After that, he told reporters, "I may have more to say."
"I acknowledge there are some ways in which you can do the
numbers where the upside prize looks quite large," Mr. Mackenzie
said -- but other scenarios "suggest this is a very risky venture
indeed."
A Feb. 5 report commissioned by Elliott and compiled by FTI
Consulting claimed shareholders would gain more than US$22 billion
if BHP gave up what Elliott calls its "obsolete and
value-destroying" structure and became a single
Australia-incorporated company. BHP said it currently views the
costs and risks as outweighing the potential benefits.
Elliott, founded by Paul Singer, owns roughly 5% of BHP's London
stock, and is known for its power to disrupt company
boardrooms.
On Tuesday, BHP said it is opening data rooms for potential
buyers of the shale business, which includes more than 838,000
acres in shale-rich U.S. regions. The company said it expects
initial bids between March and June. It could announce deals before
the end of the calendar year.
"Over a 12-month time frame, we'd like to see them sell that
onshore business and return cash to shareholders through an uplift
in the dividend and an off-market buyback in Australia," said Craig
Evans, who co-manages a natural-resources fund for Tribeca
Investment Partners. Tribeca oversees roughly 2.5 billion
Australian dollars (US$2 billion) in assets, including BHP
shares.
Several analysts project the miner could use cash from a sale,
whose price should benefit from recovering oil prices, to further
boost investor returns.
"We have had a lot of interest from many parties" and "are very
much marketing into what is a firming oil market," said Mr.
Mackenzie.
A sharp rise in commodity prices is driving up miners' earnings,
allowing them to boost dividends, cut debt and spend on new
projects and deals -- a contrast with two years ago, when a
commodities slump had many slashing costs and jettisoning assets as
losses piled up.
World commodity markets are being lifted by rare synchronized
economic growth in major economies, including China, the U.S. and
Europe.
Directors of BHP declared a dividend of 55 cents a share, up
from 40 cents a year ago, meaning it returned nearly three-quarters
of its earnings to shareholders. Net debt is down US$900 million
since mid-2017, at US$15.4 billion.
BHP didn't follow other miners -- including Anglo-Australian
rival Rio Tinto PLC -- by announcing a share buyback, as some
analysts had predicted, although it said it will set up a
dividend-reinvestment plan that will allow shareholders to use
their payouts to buy more shares.
"We have a lot of interest in having one from our retail
shareholders," said Mr. Mackenzie, adding, "obviously within
reason, their wish is our command."
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
(END) Dow Jones Newswires
February 21, 2018 02:47 ET (07:47 GMT)
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