BHP Billiton (LON:BLT) has rejected a hedge fund’s proposals to overhaul its corporate structure, the Anglo-Australian miner has said, providing a more ‘detailed response’ to activist investor Elliott Advisors. The FTSE 100 company argues that the costs associated with the investor’s plan will ‘significantly outweigh’ the potential benefits.
BHP Billiton’s share price has slipped into the red in London this morning, having lost 0.57 percent to 1,307.00p as of 10:09 BST, underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.37 percent higher at 7,392.70 points. The group’s shares have added just under 62 percent over the past year, but have been little changed so far in 2017.
BHP Billiton provided a ‘detailed response’ to Elliott Advisers’ proposal which called for the end of the miner’s dual structure which has the company based both in London and Sydney. The hedge fund also proposed a demerger of the group’s US petroleum business, arguing that the measures could unlock up to $46 billion in shareholder value.
The FTSE 100 miner, which initially rejected the proposals earlier this week, responded in detail today, saying that it had concluded that the costs and associated disadvantages of each element of Elliott’s proposal would significantly outweigh the potential benefits. BHP further believes that the investor ‘materially overstates’ the potential value which could be created by its proposals.
“The elements of the Elliott proposal as described to the board would not be in the long-term interest of shareholders,” Reuters quoted BHP Chief Executive Officer Andrew Mackenzie as saying on a call with analysts today. “I cannot overstate my strong belief that BHP Billiton is on the right track.”
Mackenzie further noted that the company had been in engagement with Elliott for eight months, and that from their “earliest engagements it was clear there were major flaws in Elliott’s proposals”.