BHP doesn't like the plan which sent its shares rocketing

Ben Birchall/PA Images via Getty Images

BHP Billiton says the costs and risks of a proposal to spin-off the big miner’s oil assets would outweigh any potential benefits.

The company’s shares rose 4.6% to $25.73 yesterday on reports that activist investor Elliott Management is pushing for capital returns to shareholders from the sale of assets.

In a statement this morning, BHP says it regularly reviews opportunities to create value, including key elements of Elliott’s proposal.

Elliott has about 4.1% of the UK-listed BHP Billiton Plc.

“We have had dialogue with Elliott over many months, consistent with our commitment to shareholder engagement,” BHP says.

“After reviewing the elements of Elliott’s proposal, we have concluded that the costs and associated risks of Elliott’s proposal would significantly outweigh any potential benefits.”

Elliott proposes that BHP replace its dual Australia-UK listing with a single UK company, with a primary listing in London and with Chess Depository Instruments quoted on the ASX.

Since the formation of the dual listing in 2001, BHP says it has returned to shareholders $US23 billion in buybacks and $US56 billion in cash dividends.

The proposal also urged BHP to demerge its US petroleum assets into an entity to be listed on the New York Stock Exchange.

“Elliott’s demerger proposal is based on a view that investors would ascribe a higher value for these assets in a separately listed entity,” says BHP.

“There is no obvious discount in BHP Billiton’s trading multiples relative to the weighted average of relevant mining and oil and gas peers.”

BHP in February posted a $US3.24 billion ($4.2 billion) underlying profit for the six months to December compared with $US412 million a year earlier on write-downs on its US oil assets and the Samarco mine disaster.

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