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Another BHP investor pressing for oil spinoff, board shake-up

Shenzi Petroleum development in the deep-water Gulf of Mexico. (Image courtesy of BHP Billiton.)

Australia’s Tribeca Investment Partners became Friday the second shareholder in world’s largest miner BHP Billiton (ASX: BHP) (LON:BLT) to publicly press for strategic changes at the company.

Tribeca, a Sydney-based boutique hedge fund, has sent the miner an eight-page letter titled “Making BHP Great Again,” in which it says the company could raise nearly $10 billion from the sale of its US shale assets.

BHP faces another shareholder revolt as Sydney-based Tribeca Investment Partners wants the miner to ditch US shale assets and reshuffle top management.

The fund, which only holds around 80,000 shares in BHP or roughly A$2 million in shares, also called for a board and management overhaul:

“We fear elements of the existing path could leave the company susceptible to ongoing underperformance and may ultimately result in this once great global mining force being considerably diminished,” Tribeca said in the letter quoted by Reuters.

This way, Tribeca joins recent calls by US activist investor Elliott Management for a divestment of BHP US oil assets to free up capital.

But unlike Elliott, the fund run by former Macquarie analysts Ben Cleary and Craig Evans, said it supports BHP’s desire to retain its conventional oil and gas business.

“It is, in our view, a core business that generates significant free cashflow through the cycle”, Tribeca wrote. “Conversely, we do not support the continued investment in the US onshore assets as these assets are unlikely to deliver appropriate free cashflow and we fail to identify where BHP has any particular skill that differentiates it from industry peers.”

Tribeca, which owns shares in both the Australian and UK listing of BHP, planted the seed for a reshuffling of BHP’s top management in light of the planned retirement of long-serving Chairman Jac Nasser.

“[Nasser’s retirement] provides a critical opportunity to reset the culture to one that covets capital efficiency and earnings per share growth and we hold high hopes that this opportunity will not be wasted,” the letter said.

The fund added it had already contacted some major Australian shareholders about its ideas, adding it hoped to talk to Elliott next week.