BHP Billiton set to spin off unwanted assets

Posted by Eric Haun
Friday, August 15, 2014

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 could be worth at least $12 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.

BHP 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", it said on Friday.

Some of the largest shareholders in BHP welcomed the announcement.

"It's good to see BHP taking the lead in the sector on this. It reassures you as a shareholder. It makes me more willing to have it as a significant bet within my fund," said Christopher Moore, portfolio manager of Fidelity Global Industrials Fund.

"Really we should see more of this in the mining sector. I would expect others to take BHP's lead. Rio Tinto, Anglo American could also follow suit in doing this."

BHP's rivals Anglo American and Rio Tinto have both said they would focus on the parts of their portfolio that can deliver higher return.

BHP is likely to offload between $1.0-2.7 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 whose profitability can be volatile.

Its net debt as of Dec. 30 was $27.1 billion.

Shares in BHP were up almost 2 percent by 1511 GMT, outperforming a 0.6 rise in an index of London-listed mining companies.

Iron Ore Drives BHP Profits
BHP is relying on iron ore for the lion's share of fiscal 2014 earnings after beating its own guidance for full-year output.

"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.

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."

Analysts and investors expect BHP to offer its existing UK shareholders - some of which may not have a mandate to own shares in companies listed abroad - the option to take shares in the new vehicle or an equivalent payment in some form, potentially through a buy back.

"I think if you have a global fund like me you will hold the Spinco (spun-off company)," Moore said. "If you are a UK-focused fund you wouldn't want the Spinco. Ideally the arrangement will incorporate that flexibility."

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.

BHP 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 they barely contribute to the company's profits now, overshadowed by a decade of soaring growth in its iron ore, copper and coal businesses driven by China's rapid economic expansion.

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

"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.

(1 US dollar = 1.0724 Australian dollar)

(By Sonali Paul and Silvia Antonioli; Additional reporting by James Regan in Sydney and Nishant Kumar in London; editing by Tom Pfeiffer and Pravin Char)

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

People & Company News

BIMCO Welcomes EU Decision on Migrants

BIMCO has stated today that it appreciates the new efforts by EU leaders to reduce increasing reliance on merchant shipping to rescue the growing numbers of

Long Beach, Los Angeles ports host forum to gather input

More than 100 cargo owners, trucking firm leaders, longshore labor, marine terminals and other goods movement industry representatives turned out Wednesday for

Arctic Nations to Fight Climate Change Despite Russia Tensions

The eight Arctic Council nations pledged on Friday to do more to combat climate change that is shrinking the vast frigid region, with countries trying to put

Bulk Carrier Trends

Norwegian Car Carriers to Buy Two from Hyundai Samho

Oslo-listed Norwegian Car Carriers (NOCC) has signed a contract with Hyundai Samho Heavy Industries for the construction of two 6500 ceu Pure Car Truck Carrier (OCTCs).

The German Shipbuilding Rebound

German shipbuilding has made a significant turnaround. The country’s shipbuilding industry has seen increases in the number of employees, orders and deliveries compared to 2013,

Algoma Central Orders New Great Lakes Ships

Algoma Central Corporation announces $160 million investment in fleet expansion and fleet renewal   Algoma Central Corporation announced that it has acquired

Finance

Norwegian Car Carriers to Buy Two from Hyundai Samho

Oslo-listed Norwegian Car Carriers (NOCC) has signed a contract with Hyundai Samho Heavy Industries for the construction of two 6500 ceu Pure Car Truck Carrier (OCTCs).

Long Beach, Los Angeles ports host forum to gather input

More than 100 cargo owners, trucking firm leaders, longshore labor, marine terminals and other goods movement industry representatives turned out Wednesday for

Venezuela Probes ex-minister accused of corruption in Ferry Deals

A former minister in President Nicolas Maduro's government denied in an interview published on Friday accusations of corruption during the purchase of three

News

Goliat FPSO in Norway

The Goliat FPSO was successfully floated off the heavy-lift vessel, Dockwise Vanguard, in the fjord outside Hammerfest, says Eni Norge    The Goliat platform has arrived in Hammerfest,

BIMCO Welcomes EU Decision on Migrants

BIMCO has stated today that it appreciates the new efforts by EU leaders to reduce increasing reliance on merchant shipping to rescue the growing numbers of

Long Beach, Los Angeles ports host forum to gather input

More than 100 cargo owners, trucking firm leaders, longshore labor, marine terminals and other goods movement industry representatives turned out Wednesday for

Logistics

Norwegian Car Carriers to Buy Two from Hyundai Samho

Oslo-listed Norwegian Car Carriers (NOCC) has signed a contract with Hyundai Samho Heavy Industries for the construction of two 6500 ceu Pure Car Truck Carrier (OCTCs).

APM Maasvlakte II Terminal Opens

APM Terminals Maasvlakte II held a ceremony  to celebrate the opening of the world’s most automated container terminal.   The  event that was attended by Dutch

Goliat FPSO in Norway

The Goliat FPSO was successfully floated off the heavy-lift vessel, Dockwise Vanguard, in the fjord outside Hammerfest, says Eni Norge    The Goliat platform has arrived in Hammerfest,

 
 
Maritime Careers / Shipboard Positions Maritime Security Maritime Standards Offshore Oil Pod Propulsion Port Authority Ship Electronics Ship Repair Ship Simulators Winch
rss | archive | history | articles | privacy | 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: 0.1641 sec (6 req/sec)