Activist investor Elliott Management upped the pressure for strategic changes at BHP on Tuesday, calling for an independent review of the mining giant’s petroleum business.
Elliott, which has built up a 4.1 percent stake in BHP’s UK-listed arm and is urging changes to boost shareholder value, said there were clear signs that the market was receptive to a new strategy for BHP.
“There is extremely broad and deep-rooted support for pro-active steps to be taken by management to achieve an optimal value outcome for BHP’s petroleum business following a formal open review,” it said in letter to management.
Elliott, founded by billionaire Paul Singer, has been pushing for BHP to collapse its dual-listed structure, spin off its U.S. oil and gas assets, and boost returns to shareholders since tabling its proposals on April 10 – all of which BHP has rejected.
Its latest letter, which did not name any other shareholders, was released just hours before BHP Chief Executive Andrew Mackenzie is scheduled to speak at a Bank of America Merrill Lynch mining conference in Barcelona that is being attended by Elliott.
“This latest salvo by Elliott is well-timed to coincide with Mackenzie’s speech,” said an analyst, on condition of anonymity as his company owns BHP shares. “It almost forces BHP to directly address them on this.”
BHP said it was disappointed that Elliott believed the company was not open to suggestions and had been misleading in its response to the New York-based investor’s calls for a change in strategy.
“We reject both claims,” the miner said in an emailed statement, adding that it would review Elliott’s latest material in full and formally respond.
A source close to BHP said the company expected to meet with Elliott in Barcelona.
Analysts at Deutsche Bank and Citi have said BHP could unleash billions of dollars by selling part or all of its petroleum business, although Citi cautioned this would bring only a one-off benefit to shareholders and the company should focus on how to grow value for shareholders.
“The current period of shareholder activism could result in a break-up and/or a significant alteration of the company’s structure,” Citi said in a note this week.
Responding to concerns raised by the Australian government, Elliott on Tuesday backtracked on its proposal for BHP to have its main listing in London, saying that it could remain incorporated in Australia and stay an Australian tax resident, retaining full listings on the Australian and London bourses.
An example would be International Consolidated Airline Group , which resulted from the 2010 merger of British Airways and Iberia. IAG has its primary listing in Spain but also trades in London via CDIs and remains part of the benchmark FTSE 100 index.
BHP has said the costs of scrapping its dual-listed structure significantly outweigh the benefits.
On its website, fixingbhp.com, Elliott also criticised BHP’s track record on share buybacks and suggested the company make a $6 billion buyback in 2018.
Such a buyback, if the current valuation remained unchanged, would lead to $2.4 billion in value accretion, equivalent to more than 12 times Elliott’s expected costs of unifying BHP’s dual listings. (Reuters)