Friday, 24 May, 2019

Elliott Management says Barcelona meeting with BHP CEO was "constructive"

BHP ditching 'Billiton' in $10 million rebranding move Rebranding is part of BHP’s efforts to emphasize its Australian roots
Debra Rodriguez | 18 May, 2017, 09:32

Elliott has also unpicked much of BHP's rationale for rejecting its Shareholder Value Unlock Plan proposals, exposing flawed and misleading claims from BHP management on the supposed costs of proposed unification measures, created to defend an entrenched "do nothing" approach.

In a letter to BHP's directors, Elliott said its talks with a number of shareholders found broad support for restructuring the petroleum business, agreement that there would be clear benefits to unifying the dual-listed structure and a shared view that there should be a renewed focus on capital returns.

In regards to capital returns, Elliott says that there is strong shareholder support for BHP to return excess capital to shareholders.

Earlier this month, federal Treasurer Scott Morrison threatened court action to prevent Elliott's original plan for BHP to have a primary London listing and its shares still traded on the ASX through CHESS Depository Interests.

The logical next step would be an in-depth, open and timely independent strategic review of the business, Elliott said.

It had also asked BHP's board to improve returns by merging the United Kingdom and Australian entities into a single Australian-headquartered and London-listed company.

BHP has said it would review the plans and respond.

Elliott's activist fight against BHP can of course end up being a victory, but it seems more likely than not that Elliott's fight against BHP will force far less real changes than the desired changes at BHP.

The hedge fund yesterday revealed a new plan whereby BHP would remain incorporated, headquartered and tax resident in Australia, with its shares listed in both Australia and London. "It nearly forces BHP to directly address them on this".

The head of the Melbourne-based firm, which only yesterday announced a $10 million rebranding campaign that will see it become simply "BHP", assured investors he could lift the value of the company - the world's largest miner - by up to 50% and nearly double its return on capital in the coming years.

"Since that time, we have made consistent progress and we are confident that continued delivery of these plans, from our stronger base today, could grow the value of our company by up to 5% and nearly double the return on capital".

In its letter, Elliott also shifted a push for BHP to spin off its USA oil and gas assets, which include activities in the Gulf of Mexico and vast onshore shale acreage.

Mackenzie added that the petroleum exploration programme has an unrisked value of more than US$20bn and cited recent successes in the Gulf of Mexico, Trinidad and Tobago, that give BHP "the confidence to accelerate our counter-cyclical investment". All options to fully realise the value of our shale acreage will be pursued, including further appraisal, new technology and additional asset sales and swaps.

Elliott said BHP's shares have underperformed its nearest peer, Rio Tinto, and the S&P/ASX 200 and the FTSE 100 indexes, over the past two to eight years.

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