Photographer: Carla Gottgens/Bloomberg

Tribeca Fund Targets BHP's Board for a Sweeping Overhaul

  • Sydney fund in talks with as many as 4 alternative directors
  • Existing board lacks debate and mining experience, fund says

BHP Billiton Ltd.’s board is being targeted for a sweeping overhaul by Tribeca Global Natural Resources Fund, opening a potential new front in the burgeoning activist campaign against the world’s biggest mining company.

The Sydney-based hedge fund, which last month joined billionaire Paul Singer’s Elliott Management Corp. in calling for changes aimed at shifting strategy at BHP, believes about five or six members of the 11-person board need to be replaced, portfolio manager Craig Evans said Tuesday in a phone interview. BHP declined to comment.

“It appears there’s been no significant and sensible debate on issues at a board level and part of that is because there’s no-one with substantial technical and operational experience that is challenging senior management on some of these issues,” Evans said. Tribeca has said the fund holds BHP’s London and Sydney traded shares, without disclosing the size of its holdings.

Elliott spokesman Michael O’Looney declined to comment on whether the fund also plans to propose the replacement of existing directors. New York-based Elliott last month struck an agreement to name three directors to the board of metals manufacturer Arconic Inc. amid a campaign criticizing under-performance at the producer.

BHP declined 1.4 percent to A$23.34 in Sydney trading Tuesday, extending its decline this year to 6.9 percent.

Activist investors have gone public since April with attacks on BHP over what they regard as misjudged shale acquisitions, poorly timed share buybacks and disappointing exploration results. Singer’s Elliott argues BHP’s leadership has destroyed $40 billion in value and last month called for an independent review of the producer’s $22.5 billion petroleum division.

Tribeca would have sufficient support from fellow investors to seek a vote on the replacement of existing board members with alternative candidates, Evans said. “We’d prefer to not need to go down that path,” he said.

Potential alternative directors who are in discussions with Tribeca have experience in either the mining or petroleum sectors, or both industries, and include Australian and international candidates, said Evans, who declined to identify the individuals as discussions are private.

“They are people with decades of experience in the sector, and who’ve been extremely successful CEOs as well,” Evans said. “That’s our biggest focus at the moment, trying to get more commodities and technical experience on to that board with people who’ve done that in a savvy way within companies.”

Tribeca intends to approach BHP and its board to initiate a discussion about a process to replace some incumbent directors and would move to a public campaign only if the Melbourne-based producer is unresponsive, according to Evans.

Members of the producer’s existing board have experience at companies including Newmont Mining Corp., Royal Dutch Shell Plc and mining sector explosives supplier Orica Ltd. BHP’s Chief Executive Officer Andrew Mackenzie, who serves on the producer’s board, held previous roles at Rio Tinto Group and BP Plc.

Shareholders with support of holders of 5 percent of voting rights are able to request a meeting to propose the appointment or removal of directors, and are able to put forward resolutions to potentially be considered at planned annual meetings, said Justin Mannolini, a Perth-based partner at law firm Gilbert + Tobin, who has previously advised companies on shareholder activism.

“Australian law is fairly fertile for shareholder activism,” Mannolini said by phone. “There are a number of features that are quite convenient for shareholders with as little as 5 percent of the company to demand changes to the board.”

BHP’s board is “continually reviewing the fit, the shape and the strategy of our petroleum business” and existing directors go “way beyond” the proposals set out by Elliott in reviewing the company’s strategy and portfolio, Mackenzie told reporters Monday in Tokyo.

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