Activist hedge fund Elliott Advisors has called on BHP Billiton to conduct an independent review of its petroleum business, saying it has found broad support from other shareholders for unlocking its value.
Elliott, which claims a 4.1 per cent stake in BHP’s UK-listed unit, says it prefers a full or partial demerger of the unit, but recognises there are other possible solutions to unlock the latent value of the petroleum business.
“Our shareholder conversations have revealed extremely broad and deep-rooted support for proactive steps to be taken by management to achieve an optimal value outcome,” it said in a letter to BHP’s board, released publicly on Tuesday.
The logical next step would be an in-depth, open and timely independent strategic review of the business, Elliott said.
The statement is part of a public campaign launched by Elliott in April, urging the miner to spin off its US petroleum business for listing in New York and to return more cash to shareholders through buybacks.
It had also asked BHP’s board to improve returns by merging the UK and Australian entities into a single Australian-headquartered and London-listed company.
Elliott has seemingly backed down on the restructure, saying on Tuesday it was open to a unified company that would retain its full share market listing in Australia and London.
It said it had listened carefully to feedback on the collapse of the dual-listed structure, including the regulatory sensitivities, and believed the solution lies in a unified business remaining Australian-headquartered and a fully Australian tax resident, with a full ASX listing and a full LSE listing.
Earlier this month, federal Treasurer Scott Morrison threatened court action to prevent Elliott’s original plan for BHP to have a primary London listing and its shares still traded on the ASX through CHESS Depository Interests.
Elliott also said it had seen a significant groundswell of dissatisfaction among BHP shareholders because of the company’s chronic underperformance, and accused its board of not being open to suggestions and misleading in its response to the original proposals.
“We reject both claims,” BHP said in a statement, adding it will review Elliott’s revised proposal in full and formally respond as appropriate.
Speaking at the Bank of America Merrill Lynch Global Metals, Mining & Steel Conference in Spain, chief executive Andrew Mackenzie said BHP had made consistent progress in the last year on its plans to improve shareholder value.
“We are confident that continued delivery of these plans, from our stronger base today, could grow the value of our company by up to 50 per cent and almost double the return on capital,” he said.
BHP has cut costs, invested in major growth projects, and has options to increase production capacity across its portfolio, Mr Mackenzie said.
All options to realise the value of BHP’s shale acreage, including further appraisal, new technology, asset sales and swaps will also be pursued, he said.