Federal treasurer Scott Morrison has moved to get ahead of a proposal from an activist investor to de-list BHP Billiton from the ASX, warning that the directors would be personally liable and that the move could constitute a criminal offence.
In an extraordinary pre-emptive move from the government, Morrison issued a statement this morning saying the government was aware of the idea being circulated in investment markets by Elliott Associates, an activist investment fund based in New York.
He said it was “unthinkable that any Australian Government could allow this original Big Australian to head offshore”.
BHP executives have been publicly rebutting the proposals from Elliott over recent weeks, as the investment firm has been campaigning for the end of the dual listing between the ASX and the London Stock Exchange, as well as a spin-off of US petroleum assets and more share buybacks.
Morrison also signalled he would likely oppose aggressive acquisition of BHP assets under foreign takeover rules.
Here’s the full statement:
The Australian Government is aware of proposals currently being circulated in investment markets relating to BHP Billiton. If these proposals proceeded, BHP Billiton Limited would cease to be listed on the Australian Securities Exchange (ASX) and its assets would be transferred to a new company that, although headquartered in Australia, would be incorporated in England and Wales and listed on the London Stock Exchange (LSE).
The Government welcomes foreign investment in Australia, but it is important that such investment be consistent with the national interest. This includes compliance with foreign investment conditions imposed on investments.
In 2001, the then Treasurer, the Hon Peter Costello, agreed to a merger between BHP Limited and Billiton plc subject to conditions considered necessary to protect the national interest. These conditions, attached in full, include that BHP Limited (now BHP Billiton Limited):
- remain listed on the ASX; and
- remain the ultimate holding company for the businesses it owned prior to the merger as long as they remain part of the combined BHP Billiton group.
These conditions apply indefinitely unless revoked or varied by me. It is clear that the proposals under discussion would not be consistent with these conditions.
BHP Billiton’s Australian roots stretch back to the Broken Hill Proprietary Company which began Australian mining operations in that iconic eponymous outback location in 1885. It opened its head office in Melbourne that same year.
In 1939, the Commonwealth Aircraft Corporation, a BHP led syndicate, provided aircraft essential to the Australian war effort. BHP operations expanded from Broken Hill to Newcastle, Wollongong, Whyalla, the Bass Strait and the Pilbara and beyond our borders through overseas acquisitions.
BHP Billiton’s Australian shares are held by hundreds of thousands of Australians directly, and by millions more through superannuation funds and other investments. The company plays an important role in the Australian economy. The conditions set down by then Treasurer Costello are in Australia’s national interest and remain necessary and appropriate. There is nothing in what I have seen of the proposals to suggest otherwise.
It is unthinkable that any Australian Government could allow this original Big Australian to head offshore.
Should BHP Billiton implement the Elliott Associates proposal contrary to the conditions imposed in 2001, it may commit a criminal offence and could be subject to civil penalties under the Foreign Acquisitions and Takeovers Act 1975 (‘FATA’). If the company is convicted of an offence, the directors could be held personally liable.
Further, a proposal by an LSE listed company to acquire the assets of BHP Billiton Limited would be a significant action under the FATA. Under the FATA, I am able to order that such an acquisition not occur if it is contrary to the national interest.
If an acquisition proceeds without my consent, I would be able to order a divestment of the assets acquired and take court action to enforce this order. The proponents of the acquisition may also be liable to civil and criminal penalties.