Proxy votes back BHP Billiton spin-off
The non-core parts of BHP Billiton look almost certain to be spun off into a new entity, with proxy votes backing the South32 demerger as expected.
At the conclusion of a general meeting in Perth, it was revealed 97.2 per cent of BHP Billiton Ltd’s shareholders and 98.1 per cent of BHP Billiton Plc investors had voted in favour of the proposal.
The final count will not be known until late on Wednesday, but the proxy votes represent the majority of the mining giant’s investors.
BHP Billiton chairman Jac Nasser earlier told the meeting the company had considered all options before settling on South32, which bundles together aluminium, base metals, silver, manganese and coal assets.
“We believe the demerger is likely to create more value than other alternatives, including asset sales,” Mr Nasser said.
“It means we will have a greater focus on operating our core businesses.
“South32 will have a strong balance sheet, giving it the ability to pursue its own growth and investment opportunities … that may not be pursued if its assets remain within BHP Billiton.”
He conceded the upfront costs were high at about $730 million, but insisted the long-term benefits would be worth it, with South32 chief executive Graham Kerr targeting some $4 billion in savings through productivity improvements.
“The payback on what we’re doing will be substantial,” Mr Nasser said.
During the meeting, shareholders expressed concern about the tax implications of the spin-off, while one investor suggested it was effectively unwinding the historic merger of BHP and Billiton in 2001, which Mr Nasser rejected.
BHP Billiton has divested more than $6.5 billion worth of assets over the past three years.
The spin-off will slash its portfolio from 41 to 19 projects, with the focus being petroleum, iron ore, copper, potash and coal.
Both companies are involved in thermal and metallurgical coal, but the projects have been divided up, with those less likely to compete for capital within BHP Billiton going to South32.
The South32 coal assets also happen to be in South Africa and Australia, so can be administered from Perth and Johannesburg under the company’s regional model.
The leaner BHP Billiton is adamant about keeping its weight off, with chief executive Andrew Mackenzie saying few projects would meet the mining giant’s acquisition criteria.
“They’re not going to fall off backs of lorries very quickly,” Mr Mackenzie told reporters after Wednesday’s meeting.
“We’re not really interested in buying back complexity.”
The company would rather invest further in its pared back, existing portfolio, he said.