Singer's BHP Plan Gets Kiss of Death From Australia's TreasurerBy , , and
‘Unthinkable’ to allow activist investor proposal: Treasurer
Elliott meeting Australian investors on overhaul proposals
Australia would block any attempt to move BHP Billiton Ltd.’s main sharemarket listing to the U.K. as proposed by New York-based activist investor Elliott Management Corp., Treasurer Scott Morrison said.
“It is unthinkable that any Australian government could allow this original Big Australian to head offshore,” Morrison said in a statement Thursday. If BHP implemented Elliott’s proposals, contrary to conditions imposed by Australia on its 2001 merger, “it may commit a criminal offence and could be subject to civil penalties,” he said.
Elliott is meeting with BHP investors in Australia this week to outline proposals it made public last month for a corporate overhaul, higher shareholder returns and a spinoff of U.S. oil assets. BHP, which held about eight months of discussions with Elliott, has rejected the plans, saying the costs and risks outweigh any potential benefits. Elliott didn’t immediately respond to a request for comment. BHP declined to comment.
The fund, founded by billionaire Paul Singer, has urged BHP to combine its two legal entities listed in Sydney and London into one group headquartered in Australia with a primary listing in the U.K., and pressed the company to use excess cashflow to fund additional buybacks.
Australia’s “parochial and emotive” attachment to BHP means that shifting the producer’s primary listing to London is “the least likely win for Elliott,” Peter O’Connor, a Sydney-based analyst with Shaw and Partners Ltd., said by phone. “There still remains some very fertile options for Elliott to pursue -- realizing value in U.S. oil and gas” and utilizing tax credits in Australia, he said.
BHP rose 0.1 percent to A$23.24 in Sydney trading Thursday. The shares have dropped about 10 percent since Elliott published proposals last month. The fund and affiliates have an interest in about 4.1 percent of BHP’s London-listed shares, according to an April 10 statement.
Australia has been swept up in the global swing towards protectionism and Morrison last year blocked foreign bidders from buying a majority stake in state-owned power network Ausgrid for more than A$10 billion ($7.6 billion) amid mounting public opposition to sales of farmland, real estate and strategic infrastructure.
Morrison said Elliott’s plans went against conditions to protect the “national interest” laid down by the government in 2001 when BHP Ltd. and Billiton Plc merged. They include ensuring BHP remains listed on the Australian Securities Exchange as well as the ultimate holding company for businesses it owned before the merger.
Elliott’s “chances of getting this up is less than 1 percent," said Michael McCarthy, chief market strategist at CMC Markets in Sydney. "It’s going to require a law change." In contrast, a push for a spinoff of BHP’s U.S. petroleum assets may be achievable, he said.
BHP, the world’s largest miner, said last month it may resurrect the sale of its Fayetteville shale gas assets in the U.S. The producer’s outgoing Chairman Jac Nasser was scheduled later Thursday to meet with Australian retail investors.
Elliott’s demands for change at BHP are also clouding prospects for a credit-rating upgrade by Moody’s Investors Service. Moody’s raised its outlook Wednesday for the Melbourne-based producer to positive from stable, but said an upgrade on the company’s A3 ratings would require reduced uncertainty around the Elliott plan and the liabilities arising from the deadly 2015 waste spill at BHP’s Samarco joint iron ore venture in Brazil.
— With assistance by Beth Jinks