BHP bows to pressure, to list spinoff in London

BHP bows to pressure, to list spinoff in London

Mining giant BHP Billiton (ASX, NYSE:BHP) (LON:BLT) has made a sharp U-turn on its initial decision to snub a London listing for its $15 billion spinoff of its less-favoured assets, bowing to pressure from European investors and the potential of a forced selling.

In a statement Thursday, The Melbourne-based miner confirmed that it would pursue a standard listing for the as-yet-unnamed new company (“NewCo”) on London’s main stock exchange.

“We are pleased to offer an additional listing in London in response to the interest investors have shown in the new company,” said Chief Executive Andrew Mackenzie.

He also confirmed a proposed primary listing on the Australian Securities Exchange and secondary inward listing on the Johannesburg Stock Exchange.

The decision comes after the company consulted shareholders on the possibility for a UK listing last month, faced with the potential of forced selling or a shaky debut for the new firm.

BHP, which is listed in both London and Sydney, had planned to carry out the spinoff in the first half of 2015 by distributing shares in NewCo to its existing shareholders. But the firm’s London-based institutional investors did not like the idea, as it would have forced them to sell any NewCo shares because their mandates require them to invest only in equities listed in the U.K.

By spinning off some assets into a new company, BHP said it would be able to focus more intensively on its core long-life operations including iron ore, copper, petroleum, coal and potash.

The new group will be based in Perth, Australia, and is headlined by the company's metallurgical coal business in Illawarra, and the Cannington lead-silver mine in Queensland.

The line-up also includes energy, coal and aluminum assets in South Africa, and bauxite, manganese and alumina in Australia as well as the Cerro Matoso nickel asset in Colombia.

All part of the “simplification” plan

The plan has been on the works for over a year, pretty much since Mackenzie took over as BHP’s boss last year. He has stressed that he would manage the company’s portfolio of businesses to boost shareholder returns. He has also emphasized BHP’s focus will be on a handful of big assets in relatively safe parts of the world.

In May, the company announced a major shake-up of non-core operations beginning with its Western Australian Nickel West business. The news came on the heels of the creation of a new aluminum division, BHP Billiton Aluminum Pty Ltd., which may include other non-core assets such as nickel and bauxite in an $18 billion company.

Since the BHP–Billiton tie up in 2001 the contribution that most Billiton assets brought to the group earnings has sunk from almost 30% at the time of the fusion to about 10% today.

“Merging with Billiton has not been a bad deal. It just happens that some of the assets they bought are now those that they do not view as having potential for the next two to three decades,” RBC Capital Markets analyst Tim Huff, said in June.

The world’s No.1 mining company has a history of spinning off non-core assets. In 2002, it demerged its steel business, which subsequently became BlueScope Steel.