Elliott Management Corp's activist campaign to shake up Anglo-Australian mining group BHP Billiton, relies on tested USA shareholder activism strategies to deliver one of the hedge fund's biggest ever bets on a company.
It is understood BHP has not been aware of the details of Elliott's proposals because Elliott only sent a letter to BHP directors outlining its suggestions on yesterday, Monday, April 10. In the letter, the fund manager also called for the adoption of a consistent capital-return policy that would seek share buybacks rather than using cash for what it called "value-destructive" large-scale acquisitions. The Elliott funds, together with certain of their affiliates, hold a long economic interest in respect of approximately 4.1% of the issued share capital of BHP Billiton plc ("PLC").
"Based on commonly utilized valuation metrics for comparable businesses, the indicated value for BHP's USA petroleum business is [approximately] US$22 billion, which is well in excess of the current analyst consensus valuation for that business", said the Elliott Funds, which hold 4.1% of BHP Billiton plc.
BHP did not immediately provide comment on the matter when contacted by Reuters, but CEO Mackenzie has previously rejected the idea of spinning off oil assets and Chairman Jac Nasser has said overhauling the dual-corporate structure could be too costly.
BHP shares rose by 3.5% in NY overnight and by 2.2% in London, after gaining 4.6% to A$25.73 in Australia yesterday.
The other element of the Elliott Advisors proposal, BHP spinning out its U.S. petroleum assets into a separate entity to be listed on the NY stock exchange, won broader support from analysts, although whether this would be beneficial to shareholders would depend on the level of debt the entity would be loaded up with if the plan were to proceed.
Elliott, referring to talks already held with BHP management, said the changes could boost shareholder value by about 50%.
Elliott's proposal of a primary listing in London would require the approval of Australia's Foreign Investment Review Board, BHP said.
Elliott also proposed that BHP Billiton split off its US oil and gas division, a move the company has rejected previously.
"We have laid the foundations for the group to substantially grow the base value of its operations. BHP should embrace a broadening of the discussion to include all shareholders", the hedge fund said.
BHP Billiton PLC has GBX 1850 highest and GBX 515 lowest target.
Over the last twelve months BHP Billiton PLC's stock price has increased by 75.29% from 750.77 to 1316.
A spinoff of USA oil assets would contradict the BHP's recent focus on growth in that division, he said.
Aberdeen is the second-biggest investor in BHP's London-listed shares, with a 4.9 percent stake worth $1.3 billion, regulatory filings to August past year collated by Thomson Reuters showed. "BHP Billiton's approach is to optimize the long-term value of the petroleum business through operating excellence". The Firm is a producer of various commodities, including iron ore, metallurgical coal, copper and uranium.
"As you know, Paul was very much involved with the anti-Trump or as they say "Never Trump" and Paul just left and he's given us his total support and it's all about unification". The Iron Ore segment is engaged in mining of iron ore.