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No near-term deals for BHP spin-off

BHP Billiton’s spin-off South32 is keeping its eye out for opportunistic mergers and acquisitions but is in no rush to seal any deals, chief executive Graham Kerr says.

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Mr Kerr says any deal would also have to be sold “very strongly” to investors.

He said mergers and acquisitions were not a key strategy for South32, which bundles together BHP Billiton’s aluminium, base metals, silver, manganese and coal assets.

“I think M&A is always opportunistic and you only do it for value,” Mr Kerr told reporters.

“We will look, we’ll be aware of M&A opportunities, but we would only pursue those if we had the mandate from our investors and we saw value.

“The industry gets fixated on growth for growth’s sake – we’ll be very focused on how we grow our cashflow.”

Mr Kerr’s comments came as BHP Billiton’s shareholders in Australia and Britain overwhelmingly backed the mining giant’s plans to spin off South32 as a separate entity.

At meetings held in Perth and London late on Wednesday, shareholders voted in favour of the spin-off.

When asked about the commodities that South32 could have on its divestment radar, Mr Kerr said each asset would have to “win the right to stay in the portfolio”.

He touched on the company’s coal assets, saying they were “not the most value accretive way we can see ourselves using our people, time or resources at the moment”.

“I think our investors in the first six months would be expecting us to actually deliver on the regional model, deliver on increased productivity and operational targets to build up a sense of confidence in the management team.

“At the same time with M&A, six months, 12 months, 18 months – we’ll always be prepared.”

Mr Kerr said South32 needed to think deeply about what it would do with its manganese assets, given volatile prices for the commodity.

Slowing down production while prices were low would be considered, he said.