BHP Billiton has knocked back an investor’s proposal to demerge its petroleum assets and end its dual-listed status to realise greater value.
New York-based firm Elliott Associates on April 10 urged BHP’s directors and shareholders to consider the option, saying the changes would allow the miner to create a new, stand-alone petroleum company listed on the New York Stock Exchange.
BHP operates two oil fields in the Gulf of Mexico, as well as onshore areas in the United States.
Elliott’s proposal would unify BHP into a single Australian-headquartered and Australian tax resident listed company, selling off the US petroleum business into a separately-listed entity.
“A demerger and separate listing of BHP’s US onshore and Gulf of Mexico petroleum assets on the NYSE would … provide shareholders with access to what we believe would be a much higher market value for that business,” the pitch says.
Elliott’s proposal also says spinning off the US petroleum businesses would “put the demerged business in a position to benefit from further operational improvements and strategic corporate activities,” and would “allow BHP’s management and investors to fully focus on the value of core BHP’s unrivalled portfolio of first-tier mineral assets”.
But BHP rejected the proposal, saying it had already considered the plan.
“BHP Billiton regularly reviews opportunities to create value,” the company said in a statement.
“Those reviews have included the key elements of Elliott’s proposal. We have had dialogue with Elliott over many months, consistent with our commitment to shareholder engagement.”
After reviewing the elements of the proposal, BHP said it has decided “the costs and associated risks … would significantly outweigh any potential benefits”.
“Elliott’s demerger proposal is based on a view that investors would ascribe a higher value for these assets in a separately listed entity,” the company said.
“There is no obvious discount in BHP Billiton’s trading multiples relative to the weighted average of relevant mining and oil and gas peers.
“BHP Billiton has disclosed the information the market needs to fully value the Petroleum business.
“BHP Billiton’s approach is to optimise the long term value of the Petroleum business through operating excellence.”