Activist investor Elliott Associates has accused BHP Billiton of taking a “do nothing” approach to its manifesto for creating greater value for shareholders.
BHP chief executive Andrew Mackenzie and his chief financial officer Peter Beaven held multiple teleconferences on Wednesday with investors and media in a bid to rebut Elliott’s call for the dual-listed company structure to be collapsed, the US petroleum assets to be demerged and more share buybacks conducted each year.
Activist investor Elliott Associates has accused BHP of having a “do nothing” strategy. Photo: David Mariuz
Mr Mackenzie said collapsing the dual-listed structure would cost $US1.3 billion plus waste valuable franking credits by distributing them to shareholders outside of Australia who could not use them.
He said the petroleum division was fully valued by the market and would struggle financially if demerged, while the “mechanistic” approach to regular buybacks was said to potentially raise debt and lower credit metrics, while making BHP more vulnerable to low commodity prices.
In a statement issued on Thursday morning, New York-based Elliott Associates said BHP’s answer sounded like a “do nothing” approach.
“Management wants to maintain a legacy, value-distorting dual-listed company structure, retain unchanged within the group the clearly undervalued US petroleum business and, rather than adopt a yardstick of accretive capital return, would leave stranded a significant and growing balance of valuable tax credits,” said Elliott in the statement.
“Accepting the status quo will neither improve performance nor maximise shareholder value. We will provide a more detailed response to management’s presentation in due course.”
RBC analysts said they did not value the US petroleum assets as bullishly as Elliott has.
“We value the US petroleum business at $US13.5 billion versus Elliott’s $US22 billion valuation,” said RBC in a note this week.
Macquarie analysts said the ability of the US petroleum assets to thrive as an independent company would depend on how much debt was ascribed to them in a demerger.
“A demerger of the US Petroleum assets could unlock value but is highly dependent on the level of debt ascribed to the business,” they said.
BHP shares were 98¢ lower at $24.34 in early trading on Thursday.
Elliott’s comments on Thursday were effectively the fifth assault in the debate, which began on Monday when Elliott went public with its views after months of talking with BHP privately.
BHP issued a reply in a statement on Monday night, which prompted a short reply from Elliott on Tuesday.
BHP gave a more detailed retort on Wednesday, which prompted Elliott to accuse it of the “do nothing” attitude.