New York-based activist investor urges BHP to spin off US oil, gas business

BHP Billiton should dump the Aussie stock exchange as its primary home in favour of London, a big US investor says.

BHP Billiton is being targeted by a New York-based activist investor urging the miner to spin off its US oil and gas business and streamline its dual-listing structure. Picture: AFP

BHP Billiton is being targeted by a New York-based activist investor urging the miner to dump Australia as its place of primary listing and spin off its US oil and gas business.

Shares in BHP spiked in late trade yesterday after hedge fund Elliott Management launched a website calling on the resources titan to adopt its “value unlock” plan.

Elliott, which has $U32.7 billion ($43 billion) in funds under management, said it was making its campaign public after sending the proposal to the BHP board.

Paul Singer, founder and president of Elliott Management Corp. Picture: Jacob Kepler/Bloomberg via Getty Images

In a statement, the hedge fund said BHP should “unify (its) dual-listed company structure”. It should create a single company that was headquartered in Australia and based here for tax purposes, the fund said.

But it said the company should be incorporated in Britain, with a primary listing on the London Stock Exchange.

The “unified” company could keep its “current stock market listings and continue to be included within key FTSE and ASX stock indices”.

Under such a scenario — likely to prove highly controversial here — the Australian Securities Exchange would be relegated to a secondary home for BHP stock.

Eliott Management wants BHP Billiton to focus on London.

With a market value of almost $130 billion, BHP is second only to the Commonwealth Bank as the biggest ASX-listed company.

In an open letter to BHP directors that was released earlier in the day, the hedge fund said the dual-listed structure had produced “a massive and continuing build-up of franking credits”, which now stood at $US9.7 billion.

Collapsing that structure would free BHP to better manage those franking credits by embarking on a series of off-market share buybacks, the fund said.

“That would be a highly value-accretive way of management deploying a large amount of capital without any additional operational risk,” Elliott said.

The dual-listed structure made even less sense following the spin-off of South32 in 2015, the letter said.

The hedge fund said BHP had a “first-class portfolio of assets which are failing to deliver optimal value for shareholders”, and its plan could boost shareholder returns by half.

Activist investor Elliott Management says BHP Billiton’s primary stock market listing should be in London.

BHP should spin off its US energy business into a separate group listed on the New York Stock Exchange, it said.

The miner’s Australian-listed shares surged 4.6 per cent to close at $25.73 yesterday — the bulk coming in the final hour of trade after the activist investor released details of its plan.

In a statement last night, BHP said that “after reviewing the elements of Elliott’s proposal, we have concluded that the costs and associated risks of Elliott’s proposal would significantly outweigh any potential benefits”.

“The board of BHP Billiton will consider further its detailed response to the proposal and will make a further announcement in due course.”

Elliott says it owns 4.1 per cent of BHP’s London-listed stock. The hedge fund has a long history of buying stakes in companies and agitating for change.

Of the 15 companies Elliott has targeted by building stakes of at least 5 per cent, 10 have gone on to ink deals worth at least $40 billion, according to an analysis by Reuters.

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