BHP's Tyro Chairman Seen Driving Deeper Shakeup at Biggest Miner

  • Ken MacKenzie plans tour of investors before taking up role
  • Management changes, asset disposals may follow, says Citigroup

BHP Billiton Ltd.’s decision to look past boardroom veterans and name its youngest director Ken MacKenzie as chairman is raising expectations of further changes in leadership and its portfolio as the mining giant grapples with smoldering shareholder unrest.

While BHP’s most restive investor Elliott Management Corp. welcomed the appointment Friday, billionaire Paul Singer’s hedge fund also called on MacKenzie, 53, to address the No. 1 miner’s performance, review the executive team and nominate new directors. Under the new chairman, there may be management changes and there’s increased potential for the sale of U.S. shale assets, Citigroup Inc. said in a note.

Ken MacKenzie

Photographer: Brendon Thorne/Bloomberg

MacKenzie plans to meet investors over the coming weeks before taking up his post from Sept. 1, and aims to “understand their perspectives,” he said in a statement. His plan will be seen as an “olive branch” after more than two months of public skirmishes over strategy and spending between BHP and critics including Elliott, according to Shaw and Partners Ltd. BHP declined to confirm whether MacKenzie will meet with Elliott.

Montreal-born MacKenzie, a skier and yachtsman, joined BHP’s board in September 2016 after lifting the market value of global packaging packaging giant Amcor Ltd. by more than 150 percent in a decade-long spell as chief executive officer that ended in 2015.

MacKenzie, who spent 23 years at Amcor, was praised by investors during his tenure for implementing programs to cut costs, shed or close under-performing assets and craft leading positions in key market segments. He oversaw about $6 billion of deals, including acquisitions of Rio Tinto Group packaging assets for the pharmaceutical, healthcare and personal care industries.

“Our expectation is that he’ll continue that kind of mindset from his new seat at BHP,” Robert Penaloza, head of Australian equities at Aberdeen Asset Management Plc, the second-largest holder of BHP’s London-listed shares, said by phone. “His appointment might also mean we’ll see further renewal across the board. We view this as a positive change.” Aberdeen, which manages about $358 billion globally, also holds Amcor shares.

BHP, with a market value of about $87 billion, has been peppered with criticism since April, when Elliott went public with demands for a corporate overhaul and castigated management decisions the fund claims have destroyed about $40 billion in value. Fellow investors including AMP Capital, Schroders Plc, Escala Partners and Tribeca Global Natural Resources Fund have also called for the company to review strategy, boost returns or refresh its board.

“The fact that the first thing MacKenzie is going to do is to get out on the road to talk to investors will be seen as a positive,” Peter O’Connor, a Sydney-based analyst with Shaw and Partners said by phone.

MacKenzie had previously won public support for the role from investors as a candidate not directly involved in about $20 billion of deals to acquire U.S. shale assets in 2011 that have led to subsequent writedowns and divestments. Elliott has called for a review of BHP’s entire oil unit, while Tribeca and Deutsche Bank AG have urged the producer to sell its onshore portfolio. BHP CEO Andrew Mackenzie acknowledged last month the acquisitions were over priced and poorly timed and flagged further sales.

MacKenzie will succeed Jacques Nasser, 69, a former Ford Motor Co. CEO, who had held the job since 2010 and served as a BHP director since 2006. Other internal candidates to succeed Nasser included Malcolm Broomhead, 64, and Lindsay Maxsted, 63, appointed as directors in 2010 and 2011 respectively, people with knowledge of the process said last week.

Boardroom changes will continue, according to Neil Boyd-Clark, a Sydney-based managing partner at Arnhem Investment Management, which has about $A3 billion ($2.3 billion) of assets under management and holds BHP and Amcor shares. “As MacKenzie gets his feet under the table he will renew the board as required,” he said.

— With assistance by Perry Williams

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