Will Paul Singer's Elliott Management Corporation Finalize BHP Proposal?

Ashley Carr
April 13, 2017

Shares in BHP Billiton(LSE: BLT) are rising this morning after it emerged that the company is being targeted by activist hedge fund Elliott Management.

Elliott's proposal of a primary listing in London would require the approval of Australia's Foreign Investment Review Board, BHP said.

In 2001, the Australian government approved the merger of Melbourne-based BHP Limited and London-based Billiton Plc under a dual-listed company structure, but only subject to a number of conditions "designed to ensure that the merger would not be contrary to Australia's national interest".

"Given the plan's potential to unlock up to $46bn in value, we and no doubt other shareholders of BHP, look forward to management providing a more thorough and reasoned assessment of the plan".

Elliott says BHP, which has two separate legal entities listed in Sydney and London that are run as one group, should unify into a single Australian-headquartered company, according to a statement Monday.

"Unwinding the dual listed company structure would reduce BHP's access to capital, but more materially a divestment of the petroleum business and return of capital to shareholders would reduce BHP's diversity and balance sheet strength", he added.

Additionally, other shareholders are expecting the benefit of the suggestion to list the mining company's oil and gas businesses on the New York Stock Exchange.

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Elliott proposed that BHP unify its corporate structure into a single Australian-based and -listed company, as well as hive off and separately list its USA petroleum business.

Elliott also proposed that BHP Billiton split off its USA oil and gas division, a move the company has rejected previously.

Finally, Elliott Management Corp increased its position in BHP Billiton plc by 157.5% in the fourth quarter. Elliott said it also held rights with affiliates to buy up to 0.4 per cent of Sydney-listed BHPBilliton Ltd, worth about US$372 million. By reviewing stock prices from the stock market history of the company and examining its analysts ratings can give an investment picture with updated information of stock which helps investors to make investing decision. It has primary listings in both Sydney (BHP.Australia) and London (BLT), plus two American listings: the depositary receipt BHP is tied to the Australia shares, and USA -traded BBL for the company's London listing.

What Elliott wants Part 3: Return more capital to shareholders and reduce debt through "discounted off-market buybacks".

Commodity prices crashed in 2015 and early 2016, but have since recovered strongly, helping to drive gains across the mining sector, which led the London stock market higher a year ago.

While BHP is under no obligation to act, the company is the latest to be targeted by a hedge fund or similar "activist" shareholder. "Elliott's proposal would put this at risk". In doing so, we have laid the foundations for the Group to substantially grow the base value of its operations.

Third, BHP would "monetise" its excess franking credits by buying back $US33 billion of its shares from investors over five years. "BHP Billiton's approach is to optimize the long-term value of the petroleum business through operating excellence".

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