BHP Billiton to Shed Unwanted Assets

Posted by Joseph Keefe
Friday, August 15, 2014

Likely to include aluminium, manganese, nickel; will also include some coal, silver assets.

Diversified mining company BHP Billiton declared its preference for a demerger of its aluminium, manganese and nickel assets on Friday, setting the stage for the formation of a separate business that one report said could be worth $14 billion.

BHP said its board was considering a spin-off at meetings ahead of its annual results announcement next week. An Australian newspaper said those plans were well advanced and would include the Nickel West business that the world's biggest miner has been trying to sell.

"A demerger of a selection of assets is our preferred option," the company, which has a market capitalisation of $185 billion, said in a statement to the Australian stock exchange.

The company has long aimed to sell or spin off its manganese, aluminium and nickel assets, which contribute little to its earnings. Simplifying the company would "generate stronger growth in cash flow and a superior return on investment", BHP said on Friday.

"We are quite keen on companies with good capital discipline ... and I think the news announced this morning fits quite well within that investment frame," said Dimitri Willems, a senior portfolio manager at Kempen Capital Management which holds BHP stock.

"It could lead to more or better capital discipline going forward and more shareholder remuneration in future."

IRON ORE DRIVES BHP PROFITS

BHP is likely to offload between $1.0-2.5 billion of its debt to the new vehicle, according to analysts. Any more than that could be challenging to handle for a company that relies on assets with volatile returns.

BHP is relying on iron ore for the lion's share of fiscal 2014 earnings after beating its own guidance for full-year iron ore output, mining a record 225 million tonnes.

"Spin-offs have the potential to crystallise value that the market may not have been able to see," said Neil Boyd-Clark, a portfolio manager at Arnhem Investment Management, which owns shares in BHP.

He declined to put a value on the spin-off ahead of an announcement on what would be included in the new company.

The Australian Financial Review (AFR) newspaper said the separate company would comprise BHP's aluminium, manganese, nickel, Cannington silver mine and South African energy coal assets and would be worth $14 billion.

Analysts were divided over the precise value of those assets, with estimates ranging from $12 billion to $23 billion.

BHP was also debating whether to spin off its coal assets in New South Wales, the AFR said, without citing any source. The new company would be based in Perth and led by BHP's Chief Financial Officer Graham Kerr, it said.

It would have a primary listing on the Australian stock exchange and was likely to take a secondary listing in South Africa, the AFR added.

BHP declined to comment on the AFR report.

"Whether to list in Australia and South Africa will be a marketing decision. It's a question of matching the investor base," said a banker familiar with BHP's thinking. "Looking at the base metals space you don't have many listed names in Australia. And in South Africa, you can tap some money from pension funds who can only invest in rand."

In its statement to the market, BHP said it expected to consider a demerger when the board meets next week and would announce any material decisions immediately.

It is scheduled to announce full-year earnings on Aug. 19.

FOUR PILLARS


UBS analyst Glyn Lawcock said last month he expected BHP to go through a three-step process, selling its Nickel West business, then spinning off its manganese, aluminium and South African energy coal businesses as a separate company to all shareholders, before unwinding its dual-listing in London.

Most of the assets that analysts expect it to shed came into the company through London-listed Billiton when it merged with BHP in 2001.

At the time, those assets were touted for the diversity they brought, creating a mining giant with roughly equal earnings from aluminium, base metals, coal and iron ore.

But those former Billiton assets barely contribute to the company's performance now, overshadowed by a decade of soaring growth in its iron ore, copper, and coal businesses driven by China's rapid economic expansion over the past decade.

At the same time, BHP expanded in oil and gas through shale acquisitions in the United States.

CEO Andrew Mackenzie has championed iron ore, petroleum, copper and coal as the group's four key commodity "pillars".

"By increasing our focus on these four pillars, with potash as a potential fifth, we will be able to more quickly improve the productivity and performance of our largest businesses," the company said in its statement on Friday.


By Sonali Paul and Silvia Antonioli

Maritime Reporter March 2015 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

ABS CEO Lays Out Vision for Technical Leadership at CMA Shipping

During the recent CMA Shipping 2015 conference in Stamford, Connecticut, ABS Chairman and CEO Christopher J. Wiernicki provided the conference's keynote address

Oceanex Named One of Canada’s Best Managed Companies

Oceanex Inc. was named one of Canada’s Best Managed Companies Gold Standard Members in 2014. This national award is sponsored by Deloitte, CIBC, National Post,

Navy Awards Austal $691M for Two Littoral Combat Ships

The U.S. Navy has ordered two new littoral combat ships from Austal, the shipbuilder said in a press release today. The two orders, worth $691 million, are part

Bulk Carrier Trends

Bulk Carrier Runs Aground in Delaware River (Link to Video)

Coast Guard Sector Delaware Bay is investigating a ship aground in the Delaware River near the Burlington Bristol Bridge, which connects Burlington, NJ and Bristol Township, PA.

ABS CEO Lays Out Vision for Technical Leadership at CMA Shipping

During the recent CMA Shipping 2015 conference in Stamford, Connecticut, ABS Chairman and CEO Christopher J. Wiernicki provided the conference's keynote address

Baltic Sea Freight Index Down on Lower Rates

The Baltic Exchange's main sea freight index, which tracks rates for ships carrying dry bulk commodities, fell on Wednesday, pulled down by a fall in rates across all vessel segments.

Finance

BMT Partners with Aage Hempel

BMT SMART (BMT),  has announced  that Aage Hempel has become an accredited service partner.  This agreement will provide both organizations with the opportunity

Tanker Backlog Builds at Basra

Ships face up to a three week wait; bad weather in February delayed loading, created backlog. * April intake to be reduced to clear backlog By Keith Wallis SINGAPORE,

U.S. Port Delay Boost February Air Freight

Global air freight volumes rose 11.7 percent year-on-year in February, driven by the Chinese New Year, the International Air Transport Association said on Wednesday.

Energy

Hess Selects BMT for Stampede Marine Monitoring System

BMT Scientific Marine Services (BMT), an international maritime design, engineering and risk management consultancy, has been selected by Hess Corporation to

FSL Trust Signs Charter Agreement with US Oil Company

FSL Trust Management Pte. Ltd. (FSLTM), as trustee-manager of First Ship Lease Trust, has entered into a two-year time charter agreement with a prominent US

Blaze hits Mexico Oil Platform, 300 Workers Evacuated

Mexican state-run oil company Pemex said on Wednesday that it was fighting a fire on oil platform in Campeche Bay on the Gulf of Mexico, home to the country's biggest oil field,

News

Bulk Carrier Runs Aground in Delaware River (Link to Video)

Coast Guard Sector Delaware Bay is investigating a ship aground in the Delaware River near the Burlington Bristol Bridge, which connects Burlington, NJ and Bristol Township, PA.

Largest All-Electric Pipe Bender Starts Operations at Newport News Shipbuilding

Unison has commissioned what is believed to be the largest all-electric tube bending machine ever produced. The machine has started operations at Newport News Shipbuilding,

Oceanex Named One of Canada’s Best Managed Companies

Oceanex Inc. was named one of Canada’s Best Managed Companies Gold Standard Members in 2014. This national award is sponsored by Deloitte, CIBC, National Post,

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Maritime Security Maritime Standards Naval Architecture Pipelines Salvage Ship Repair Ship Simulators Sonar
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.2020 sec (5 req/sec)