MAC: Mines and Communities

BHP extracts itself from the London Stock Exchange

Published by MAC on 2021-08-19
Source: Yahoo News, Reuters

The move comes after two decades as part of the index.

BHP is delisting from London
Lucy Harley-McKeown

Yahoo News
August 18, 2021

Mining behemoth BHP is leaving the FTSE 100 index (^FTSE), as it plans to scrap a dual listing of its shares in Sydney and London.

The move comes after two decades as part of the index. BHP will move its main listing to Australia following an announcement on Tuesday, with a secondary listing on UK markets.

As a result of the move, many UK investors will be forced to sell their holdings.

The industry giant is the world's biggest mining company and is a huge player in the market, regularly topping the charts in terms of market value.

The company's chairman Ken MacKenzie said the move would serve to "unify BHP's corporate structure."

The company's stock was 5.2% lower by 1pm on Wednesday in London.

"Our plans announced today will better enable BHP to pursue opportunities in new and existing markets and create value and returns over generations," said MacKenzie.

The delisting proposal comes just days after the company said it would be extracting itself from fossil fuels, merging its oil and gas assets with Australia's Woodside. The company will shift towards commodities such as copper and nickel. Its thermal coal mine is also up for sale.

It is the second corporate giant to look at abandoning a dual structure in London in the past five years — Unilever looked at simplifying its own structure and opting for an Amsterdam listing, prompting speculation about Brexit flight.

Those plans were ultimately scrapped, however, after proposals were rejected by the shareholders.

BHP's move will make dealmaking easier for the company, as well as decarbonising and net-zeroing its output.

Although it will also spark worry in UK investors, at a time when politicians and officials are looking to make London a more attractive place to list.

According to the Financial Times, BHP ended Tuesday as the second biggest company on the London Stock Exchange with an equity market value of more than £129bn ($177.5bn), just behind AstraZeneca (AZN.L) at £133bn.

BHP reshapes portfolio, set to quit London's FTSE

Melanie Burton and Clara Denina

Aug 17, 2021

MELBOURNE - BHP Group reported its best annual profit in nearly a decade on soaring iron ore prices, as the world's biggest listed miner announced an exit from its $13 billion petroleum business in a portfolio shake-up that will see it leave London's FTSE100 index.

On a day of sweeping changes, BHP said it was going ahead with its Jansen potash project in Canada and, in a blow to the London Stock Exchange, unveiled plans to do away with its dual-listed share structure. That will make Sydney its main listing.

"(Share) unification will simplify BHP's structure, make it easier for the company to make equity-based acquisitions, and make it easier for other corporate restructurings, including the Petroleum/Woodside merger," Jefferies analysts said in a note.

The group plans to sell its petroleum assets to Woodside Petroleum Ltd, creating a new, bigger petroleum company to better navigate the energy transition and give shareholders greater choice in how they manage their fossil fuels exposure, Chief Executive Mike Henry said. read more

The deal will give BHP shareholders a 48% stake in the new company.

"We (will also) create a better ability to allocate capital within BHP towards investments longer term ... in future facing commodities and support for more returns to shareholders," Henry said.

BHP's London-listed shares surged nearly 10% after its results.

The miner's Australia-listed shares have climbed more than a fifth this year as it posted record iron ore output and earned more than double per tonne for the steel-making ingredient.

Iron ore prices have hit record highs supported by Beijing's infrastructure push, although a resurgence of COVID-19 cases in China and its vow to lower emissions by curbing steel output is expected to be a drag on the commodity.

BHP's underlying profit for fiscal 2021 rose to $17.08 billion, but slightly missed a consensus of $17.46 billion compiled by Vuma.

The miner will pay $2 per share as a final dividend, totalling $10.1 billion, bringing the total payout for the year to $3.01 a share, or $15.2 billion.

BHP said it was going ahead with its Jansen potash project, which is expected to cost $5.7 billion in the first phase, offering the company a route to growth in new "future-facing commodities".

The miner took a $1.3 billion charge for existing infrastructure spending on its potash asset, which analysts said could make it more attractive to any potential partner.

"Giving the go ahead to Jansen is not enough, they should do much more," said a top 20 investor who declined to be named. "They should create a partnership with Nutrien Ltd and even take it over."

The Canadian potash major is seen as an ideal partner to dilute BHP's risk and development costs. BHP says it is open to but not in need of a partner, while Nutrien has said that any tie-up with BHP is not its focus.

Jansen is expected to produce 4.35 million tonnes of potash per year from 2027. Potash is a key element in plant nutrition that also makes crops more drought resistant.

On a call following the results, CEO Henry said BHP remains committed to its high quality steel-making coal business which it expects to grow with infrastructure needs supporting the energy transition, even as the company looks to exit thermal coal.

BHP took an impairment charge of $1.70 billion in fiscal 2021 related to rehabilitation and mine planning at its thermal coal assets for which a sales process is still underway.
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