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Elliott sees US$22b uplift in value with a simpler BHP

[MELBOURNE] Activist investor Elliott Management Corp has called on BHP Billiton Ltd to immediately review its dual structure after commissioning research that argues reorganizing as a single company in Australia would add more than US$22 billion in value to the miner's shareholders.

Creating a unified company, headquartered and incorporated in Australia, with a primary listing in that country and additional listings elsewhere, would cost US$391 million, according to the report by FTI Consulting Inc. BHP is the world's biggest miner and currently operates as two entities based in Melbourne and London.

BHP's board should publicly commit to its own review by the time the company announces half-year earnings on Feb 20, Elliott said in a letter to Chairman Ken MacKenzie, reigniting its campaign against the dual-listing structure that was made public in April last year. New York-based Elliott, run by billionaire Paul Singer, is the second-largest holder of BHP's London-listed stock and has also called on the miner to deliver enhanced returns and overhaul its oil and gas unit.

BHP Chief Executive Officer Andrew Mackenzie said in October the costs of ditching the dual-listing would exceed the potential benefits. The miner has previously calculated the likely cost would be at least US$1.3 billion. The company declined to comment when contacted by Bloomberg News.

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Under BHP's existing structure - a legacy of the 2001 merger of Australia's BHP Ltd and the UK's Billiton Plc - the company has two headquarters and two main stock market listings, but is run as a single entity under the same management and board. Elliott has said the creation of a single Australian company would increase BHP's value by removing a discount between its shares in London and Sydney.

Creating a single entity would boost BHP's valuation, allow greater flexibility to use stock in any acquisitions, make future spin-offs easier, reduce costs and bolster transparency, according to FTI's study, which foresees a US$14.1 billion increase in market valuation and US$8.7 billion through the release of Australian tax credits via dividends and buybacks.

There's added urgency for a review as a simpler structure could boost the value of new capital management programs, according to Elliott. The biggest miners are expected to lift returns as strong commodity prices swell profits, while BHP is accelerating a potential US$10 billion sale of its US shale assets and may return some of the proceeds to investors.

Elliott's decision to commission the FTI report follows conversations with numerous investors, who also want the issue to be independently assessed, it said in the letter.

The fund, which last made public comments on BHP in August, said it has been encouraged by the company's recent decisions to exit US shale, defer the Jansen potash project in Canada and review procedures to allocate capital.

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