Hedge fund urges BHP to drop British arm

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The other element of the Elliott Advisors proposal, BHP spinning out its U.S. petroleum assets into a separate entity to be listed on the NY stock exchange, won broader support from analysts, although whether this would be beneficial to shareholders would depend on the level of debt the entity would be loaded up with if the plan were to proceed.

Elliott, which holds about 4.1 per cent of BHP's London-listed shares, said the miner could increase value attributable to shareholdings of up to 48.6 per cent for investors in the company's Sydney stock and 51 per cent for London shareholders.

In its rebuttal, BHP said it had kept the dual listing structure under review, but "we have not yet identified sufficient benefits to outweigh the significant costs which would be incurred in unifying" the listing.

But in late February after unveiling a almost eight-fold rise in half-year profit, BHP Chief Executive Andrew Mackenzie said price corrections loomed, notably for coal and iron ore. "We have introduced a rigorous capital allocation framework, which balances value creation, cash returns to shareholders and through the cycle balance sheet strength in a transparent and consistent manner", says BHP. BHP rallied as much as 5.8 percent in London on Monday after the release of the letter, before ending the day at its highest close in three weeks.

Elliott's move on BHP follows its activist role in aluminum-parts maker Arconic Inc., which split from Alcoa Inc. previous year.

BHP is now listed in both London and Australia, with Elliott pushing for a de-listing in the capital. It has primary listings in both Sydney (BHP.Australia) and London (BLT), plus two American listings: the depositary receipt BHP is tied to the Australia shares, and USA -traded BBL for the company's London listing. Elliott is seeking to oust Arconic Chief Executive Officer Klaus Kleinfeld and replace four directors.

In 2001, the Australian government approved the merger of Melbourne-based BHP Limited and London-based Billiton Plc under a dual-listed company structure, but only subject to a number of conditions "designed to ensure that the merger would not be contrary to Australia's national interest".

BHP Billiton plc (NYSE:BBL) Industrial Metals & Minerals has a current market price of 32.84 and the change is -0.39%.

With any pressure likely to take some time to build, several London-based hedge funds spoken to by Reuters said they were steering clear for now. Under BHP Billiton's updated dividend policy, shareholders now receive a minimum 50% of underlying earnings as a dividend each period. "BHP Billiton's approach is to optimize the long-term value of the petroleum business through operating excellence". The company said in February that oil and copper are better placed in longer-term than materials including iron ore and coal. Finally, BNP Paribas reaffirmed a "neutral" rating and set a GBX 1,268 ($15.83) price objective on shares of BHP Billiton plc in a report on Thursday, December 1st.

BHP Billiton Plc is a global resources company. It also comes after last month's 2 billion pound ($2.5 billion) investment by billionaire Anil Agarwal in rival miner Anglo American Plc.

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