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 August 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

All Set for the Long Beach Arts Month

A gala reception Saturday, Oct. 4, will kick off a month-long art exhibition showcasing the Port of Long Beach in images captured by professional and amateur photographers.

MOL Restructures Asia to S. Africa Service

Mitsui O.S.K. Lines, Ltd. (MOL) announced the restructuring of its existing Asia to South Africa liner services into two direct loops. One service will call South China,

Norvestor to Become PG’s Largest Shareholder

Norvestor VI, L.P., a fund advised by Norvestor Equity AS, announced it has signed an agreement to invest in Ing Per Gjerdrum AS including its subsidiaries PG Hydraulics AS and PG Construction AS.

Finance

Norvestor to Become PG’s Largest Shareholder

Norvestor VI, L.P., a fund advised by Norvestor Equity AS, announced it has signed an agreement to invest in Ing Per Gjerdrum AS including its subsidiaries PG Hydraulics AS and PG Construction AS.

GasLog Closes First Option Vessels Dropdown

GasLog Ltd.  announced today the closing of the sale of two modern liquefied natural gas (“LNG”) carriers, the Methane Jane Elizabeth and Methane Rita Andrea,

Brent Holds Above $97, Eyes Worst Quarter Since 2012

Brent crude futures hovered above $97 a barrel on Tuesday, aided by firm U.S. and Chinese data, but the oil benchmark was on track for its deepest quarterly drop

Energy

ABB WinsTunisia's Gas Treatment Plant Bid

ABB, the leading power and automation technology group, has been awarded a $216 million contract to deliver a gas treatment plant to the South Tunisian Gas Project (STGP).

GasLog Closes First Option Vessels Dropdown

GasLog Ltd.  announced today the closing of the sale of two modern liquefied natural gas (“LNG”) carriers, the Methane Jane Elizabeth and Methane Rita Andrea,

Schlumberger Releases 2014 Software Platforms

Schlumberger has released the 2014 versions of its industry leading software platforms. The Petrel* E&P software platform, Techlog* wellbore software platform,

News

Nigerian Customer Orders Ninth Damen Dredger

A Nigerian customer has added its ninth Damen dredger to its fleet. The Cutter Suction Dredger type CSD500 was chosen due to the availability of Damen Field Services in Nigeria,

N-Sea Completes Inaugural System Diving Scope

Inspection, maintenance and repair (IMR) specialist N-Sea has recently completed its inaugural diving scope with the TUP Diving System (Transfer Under Pressure).

Steel Cut for Yamal LNG Project’s Lead Tanker

A steel-cutting ceremony was held on September 29 for the lead gas tanker ordered by SCF Group for transportation of liquefied natural gas (LNG) under the Yamal LNG project.

 
 
Maritime Contracts Maritime Standards Naval Architecture Navigation Offshore Oil Pipelines Pod Propulsion Port Authority Salvage Ship Repair
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: 0.2459 sec (4 req/sec)