BHP Billiton Limited (BHP) Receives $36.70 Consensus PT from Analysts

BHP Billiton plc logo

BHP Billiton plc logo

The move, announced Monday, comes on the heels of calls from shareholders including activist investor Elliott Management and Australia's Tribeca Investment Partners to change its corporate structure and incorporate in the UK.

"There is extremely broad and deep-rooted support for proactive steps to be taken by management to achieve an optimal value outcome for BHP's petroleum business following a formal open review", Elliott wrote in a letter to BHP's management.

Elliott, founded by billionaire Paul Singer, has been pushing for BHP to collapse its dual-listed structure, spin off its US oil and gas assets, and boost returns to shareholders since tabling its proposals on April 10 - all of which BHP has rejected.

It had previously 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. They are separate legal entities with different investor bases, but are managed as if they were one.

US activist investor Elliott Management has ceded some ground in its campaign against BHP (BHP.AU), saying it now supports the mining giant remaining incorporated in Australia.

In its letter, Elliott also shifted a push for BHP to spin off its USA oil and gas assets, which include activities in the Gulf of Mexico and vast onshore shale acreage.

Responding to concerns raised by the Australian government, Elliott on Tuesday backtracked on its proposal for BHP to have its main listing in London, saying that it could remain incorporated in Australia and stay an Australian tax resident, retaining full listings on the Australian and London bourses.

Elliott argued there would be benefits to collapsing BHP's dual-listed structure, spinning off its USA oil and gas assets and improving capital returns.

Those demands won qualified support from Australian boutique investment fund Tribeca Investment Partners, which said earlier this month that BHP should abandon its USA shale assets, but retain its U.S. deepwater operations located in the Gulf of Mexico.

BHP has said the costs of scrapping its dual-listed structure significantly outweigh the benefits. By 0730 GMT on Tuesday, BHP was down 0.2 percent.

In the prior 12 months BHP Billiton PLC's stock price has increased by 46.9% from 810.39 to 1190.5.

BHP said it would review the proposals and dismissed claims that it wasn't open to suggestions. Mackenzie said technology programs to improve safety, lower costs and unlock resource with an unrisked value of up to USA $12 billion were among the most capital efficient options in the portfolio.

"We and other shareholders are concerned that despite the clear signs that the market is receptive to a new strategy for BHP, current management seems intent on quieting the enthusiasm for BHP to dig deeper in tackling the obvious shareholder value enhancement opportunities which exist", the letter said.

The investor blamed BHP's US$23bn venture into the United States onshore oil and gas sector, the US$8bn spent on petroleum exploration with no apparent value created and about US$9bn poured into share buybacks at inflated prices.

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