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London loses out to Sydney as BHP announces major overhaul
17 August 2021, 11:34
The move, and a spike in profit, sent share prices soaring in London on Tuesday.
Anglo-Australian mining giant BHP has ripped up its dual nationality. This is the most radical overhaul to its business since it was formed in a merger two decades ago.
Unveiling the change, the business said that it will abandon a structure which sees it listed as two separate companies on the London and Sydney stock exchanges.
Its shares will continue to be listed in the UK, but as an Australian business.
“Now is the right time to unify BHP’s corporate structure. BHP will be simpler and more efficient, with greater flexibility to shape our portfolio for the future,” said BHP chair Ken MacKenzie
“Our plans announced today will better enable BHP to pursue opportunities in new and existing markets and create value and returns over generations.”
It is a move that some investors have been pushing for for years.
In 2018 Elliott Advisors, an activist hedge fund based in New York, claimed that the move would unlock more than 22 billion dollars in value (£16 billion at today’s exchange rate) for the company.
At the time BHP said the costs would outweigh the benefits.
The business’s change of heart will see the unwinding of the system that has been in place in 2001 when Australia’s BHP merged with the UK’s Billiton.
The company was known as BHP Billiton until 2017.
Many companies are listed on two or more stock exchanges around the world. But most choose a second listing as a way to appeal to more shareholders.
Dual structures like BHP’s are more uncommon and usually the result of a merger between firms listed on two separate exchanges.
Unilever also abandoned its dual structure more than three years ago when it chose London above Amsterdam.
BHP also told shareholders that its pre-tax profit had risen to 24.6 billion dollars (£17.8 billion) in the last financial year, up from 13.5 billion dollars (£9.8 billion).
It further confirmed a plan to merge BHP’s oil and gas business with Australia’s Woodside, creating one of the world’s ten biggest producers of liquified natural gas.
BHP will hand its shares in the new business to its current investors, who will own 48% of the company.
BHP chief executive Mike Henry said: “The merger of our petroleum business with Woodside will create a top 10 global independent energy company, unlocking value for BHP shareholders, including through synergies, and a stronger, more resilient combined business that will be better positioned to continue to grow value as it navigates the energy transition.”
Shares rose by as much as 9.8% on Tuesday morning.