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Activist backtracks on BHP plan
18 May 2017, 09:25 | Cedric Leonard
Elliott Associates calls for BHP to 'think big' in overhauling operations
Chief Executive Officer Andrew Mackenzie plans to meet with representatives of Elliott Management Corp. this week as the hedge fund continues to push for the sale of the company's US petroleum business, according to two people familiar with the situation.
Elliott, which has built up a 4.1 per cent 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.
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.
Activist Investor Elliott Management has been going after BHP Billiton Ltd (NYSE: BHP), with billionaire Paul Singer leading that charge, for more than a month. Elliott suggested a full or partial demerger of the business but asked for an in-depth independent review of the petroleum operations first.
It had also asked BHP's board to improve returns by merging the United Kingdom and Australian entities into a single Australian-headquartered and London-listed company.
He said key contributors to value creation included further cost reductions which supported a 10 percent value uplift."We have achieved a great deal over the past year but we are not standing still", Mackenzie said.
It would remain Australian headquartered and an Australian tax resident, Elliott said, retaining full ASX and LSE listings, with ordinary shares listed on the ASX.
The statement is part of a public campaign launched by Elliott in April, urging the miner to spin off its United States petroleum business for listing in NY and to return more cash to shareholders through buybacks. "It nearly forces BHP to directly address them on this".
BHP Chief Executive Officer Andrew Mackenzie today updated progress on the Company's roadmap to grow long-term shareholder value.
"Since that time, we have made consistent progress and we are confident that continued delivery of these plans, from our stronger base today, could grow the value of our company by up to 5% and nearly double the return on capital".
After the meeting, an Elliott spokesman said the meeting was private but constructive.
In regards to onshore USA petroleum, Mackenzie said that all options were on the table.
Elliott had been pushing originally for BHP to collapse collapse its dual listings on the London and Australian sharemarkets, and move its domicile and primary listing to London, and spin out its North American oil and gas assets.
He said BHP now has major growth projects valued at up to US$25bn, offering potential average returns of more than 16% at consensus prices.
"So far I think (BHP) make a convincing case to let them extract value as they have in other parts of the business", he said.
It said BHP has underperformed Rio Tinto PLC, its nearest peer, as well as the S&P/ASX 200 and the FTSE 100 indexes, over the past two to eight years.
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