The hedge fund, Elliot, holds 4.1 per cent of shares in BHP Billiton’s UK-listed stock and is now pressuring the company to abandon its dual listing in Australia and the UK, as well as spinning off its US petroleum business to list on the New York Stock Exchange.
According to Reuters, Elliot has assets worth $US32.7 billion, with $3.81 billion invested in BHP Billiton PLC.
“The goal is to provide details of the BHP shareholder value unlock plan to all of BHP’s shareholders so that BHP can engage openly with all parties on the plan,” Elliott said in a statement.
“Unfortunately, despite the progressive and successful demerger of South32 in May 2015, BHP’s management still cannot deliver optimal shareholder value without resolving the shareholder value inefficiencies caused by its dual-listed company structure; monetising the intrinsic value of BHP’s US petroleum business, the value of which is being obscured by its continued inclusion within the group; and enhancing capital management to an optimal level,” Elliott said.
Elliott estimates that despite the British arm of BHP having 40 per cent of shares on issue, only generates around 9 per cent of earnings before interest, taxation, depreciation and amortisation.
“The long-term misalignment of profits vs shareholder base in the structure has led to a massive and continuing build up of franking credits – totalling $US9.7 billion or circa 10 per cent of BHP’s market capitalisation,” the fund said.
“Absent a clearly defined optimal path to monetising those franking credits, they are not being appropriately valued by the market.”
Peter O’Connor, a Metals and Mining analyst told Sky News that actions won’t necessarily drive shares.
“My read on this development is that it will be the jaw-boning and the discussions that will drive the share price not so much the actions,’ he said.
“There’s nothing new that I’ve seen that hasn’t been discussed at some stage in the last decade, two decades or more.
“The whole idea of an oil spin-off or de-merger has been around for as long as BHP’s had petroleum.”
BHP Billiton has not yet commented on the Elliott proposals.