Activist hedge fund Elliott has revitalised its push for BHP to unify its dual-listed structure, saying a restructure could be worth over $28 billion in shareholder value.
Elliott, a major BHP shareholder, made headlines in 2017 with calls for the mining giant to rid itself of many of its non-core business ventures, and to review its dual listing in Australia and the UK.
Elliott scored a partial victory in August when BHP announced it would review its US shale investments, in a bid to focus more on maximising shareholder value.
Now the activist investor has returned, presenting BHP’s chairman Ken MacKenzie with an independent report from advisory firm FTI Consulting, saying a listing unification would cost just US$391 million, and could deliver “in excess of” US$22 billion in value to BHP shareholders.
“Elliott has consistently urged BHP to conduct an independent review to provide shareholders with hard facts on the benefits and costs of unification,” the fund wrote on February 5.
“To move this issue forward – and in response to the demands of numerous BHP shareholders around the world for these issues to be properly examined – Elliott commissioned FTI Consulting … to conduct an independent analysis of unification.”
Elliott said the analysis showed it was “beyond serious doubt” that unifying the company’s “inefficient” dual-listed structure would create significant value. “The debate has always concerned how much value would be created,” Elliott asserted.
“FTI Consulting has undertaken an independent evaluation which measures the magnitude of the value release opportunity: in excess of US$22 billion, or equal to 18% of BHP’s current market capitalisation.”
The report estimates US$14.1 billion of this value would derive from “a substantial increase in BHP’s market value reflecting the enhanced strategic, financial, organisational and structural enhancements enjoyed by a unified BHP”.
The remaining value would come from resolving an inefficiency that exists under the current dual-listed structure, which FTI said restricts the optimal release of value from franking credits via dividends and off-market buybacks.
Moreover, the report estimates a unification would only cost BHP US$391 million – a figure which “clearly pales in comparison to the benefits identified”.
“Elliott’s decision to commission FTI Consulting’s independent report grew from our long-held conviction, backed by our own extensive analysis, that unification has the ability to unlock significant value,” the hedge fund said in conclusion.
“Our conversations with dozens of BHP shareholders around the world underscored that conviction. Now that we have the report’s independent analysis and findings, which very clearly demonstrate the extent of the positive value case for unification, it is time for clear and tangible action to be taken.”