BHP Hit With New Activist Plan From Top Hedge Fund Performer

Updated on
  • Sydney-based Tribeca urging shale sale, leadership changes
  • BHP to hold discussion with fund later this month, person says

BHP Billiton Ltd. is facing a fresh set of activist demands. This time it’s from the world’s best-performing hedge fund, which is urging the biggest miner to sell U.S. shale assets, overhaul its leadership and extend its suite of commodities to tap rising demand for batteries.

Sydney-based Tribeca Global Natural Resources Fund, which gained 145 percent in 2016 to make it last year’s top fund, added to demands for change led by billionaire Paul Singer’s Elliott Management Corp.

Outlining a plan titled “Making BHP Great Again,” in a letter sent to clients Thursday, Tribeca portfolio managers Ben Cleary and Craig Evans called on BHP to divest onshore U.S. oil and gas assets that the fund values at about $10 billion to allow investment in growth and an initial $5 billion buyback or special dividend. BHP declined to immediately comment on the Tribeca plan.

The fund, ranked last year’s best performer among more than 10,000 rivals tracked by data provider Preqin, believes improved performance for BHP may require “significant turnover of board members and executives,” according to the letter. It also called on the producer to review acquisitions in lithium, graphite and cobalt, materials used in batteries for mobile devices and electric vehicles.

“While it is not a simple task, under strong and fresh leadership, that covets capital efficiency, EPS growth and values risk-adjusted returns, we believe a great deal of value can be built,” the Tribeca portfolio managers said in the letter. The fund holds BHP’s London and Sydney traded shares, Tribeca said, without disclosing the size of its holding.

BHP fell 2.7 percent to close at A$22.62 in Sydney trading, the lowest since November, as miners declined amid a broad sell-off of commodities. In London, the stock rose 1.9 percent to 1,138 pence by 11:12 a.m. local time.

Investor Talks

BHP held about 8 months of discussions with Elliott, which met with the company’s investors in Australia this week, over the fund’s proposals for a spinoff of U.S. oil assets, higher shareholder returns and a plan to shift the primary listing to London.

The producer rejected Elliott’s plans as too costly and lacking sufficient benefit, while Australia’s Treasurer Scott Morrison said Wednesday the government would block any attempt to move BHP’s main sharemarket listing to the U.K.

Tribeca, which didn’t approach BHP prior to sending its letter to investors, favors retaining conventional oil and gas assets and maintaining BHP’s current corporate structure with listings in Australia and the U.K., it said.

BHP is scheduled to meet with Tribeca later this month, amid a round of discussions with investors that’ll follow Chief Executive Officer Andrew Mackenzie’s speech at a Bank of America Merrill Lynch conference in Barcelona, according to a person with knowledge of the plans, who spoke on condition of anonymity because the information was private.

(Updates with London shares in sixth paragraph.)
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