WHAT OTHERS THINK

“The $14.7 billion BHP capital management program is being funded by the sale of the company’s onshore gas assets in the United States. This disposal can be partly sheeted home to the pressure brought to bear by activist investor Elliott. That is not to say that Elliott is happy with the buyback and special dividend. It is still focused on forcing BHP to end its dual-listed company structure.” –Tony Boyd, Australian Financial Review

“BHP’s landmark $592 million settlement of its transfer pricing dispute with the Australian Taxation Office has taken it a step closer to unwinding its contentious dual-listed structure. Shaw and Partners analyst Peter O’Connor said the ATO settlement could represent a ‘significant step forward’ for unwinding the DLC.” –Paul Garvey, The Australian

“The agreement [with the ATO] is a victory of sorts for Elliott, the hedge fund that has been waging an activist campaign against BHP since spring last year. The fund wanted to call a halt to the Singapore wheeze, arguing that it had tarnished BHP’s reputation.” Simon Duke, The Times

“Elliott and others argued that dividends flowing to the Plc stream of the business invariably represent a waste of franking credits. And this, partly, ought to inform the BHP board of the need to dismantle the DLC.” –Matthew Stevens, Australian Financial Review

“Some estimates suggest unifying would be worth many billions to BHP. In reality it is hard to quantify, but there’s no doubt it’s a decision that would add substantial shareholder value. Unlike Unilever, BHP has no emotional tie to the UK. Its listing is a legacy issue, and the miner has little physical presence here. Indeed, its moniker reflects that BHP is about one 10th of the Australian index. Unifying a corporate structure can make much commercial sense, as firms that were dual-listed in the UK and elsewhere have established. It delivers economies of scale, a simplified structure and is more efficient from a capital-raising, managing and administrative perspective. The index providers in the UK should understand this, accept these moves will occur and show flexibility, allowing remaining dual-listed firms to stay on the FTSE 100, even if they unify overseas.” –Gerard Lyons, City AM

“The world’s largest miner will hand back all $10.4 billion from its U.S. shale sale in a dividend and giant buyback. A nudge from pushy investor Elliott Management and greater deal discipline have led to a better use of capital than in the last commodities cycle.” –Clara Ferreira, Reuters Breakingviews

“Hedge fund Elliott, for one, wanted buybacks to increase. It also urged BHP to tackle its pile of tax offsets known as franking credits that built up under rules aimed at preventing the government from collecting twice on dividends. Thursday’s announcement helps to fix both.” –Clara Ferreira, Reuters Breakingviews

“In the annual report, BHP for the first time acknowledged that activist hedge fund Elliott Management — which launched a campaign to restructure BHP and galvanised investor discontent over the performance of US shale — has been a significant holder of London shares for some time.” –Matt Chambers and Samantha Bailey, Australian Financial Review

“Many experts believe BHP is a better company for having gone under Elliott's microscope.” –Australian Financial Review

“There is certainly an argument that Elliott's campaign has made BHP and a faster, more focused company that is also more transparent.” –Australian Financial Review

“During a question and answer session with the miner’s retail shareholders, (BHP’s Chief Financial Officer) Peter Beaven also said that collapsing the DLC structure was being examined by the company, along with other comments which suggest that the company does not have an immovable, rigid, permanent opposition to such a change.” –The Sydney Morning Herald

“There's a strong enough case on the merits — as well as sufficient investor support — that BHP should at least commission its own independent review of this last part of Elliott's proposal.” –David Fickling, Bloomberg Gadfly

“BHP said it will keep cutting [debt]. That is all good for shareholders, as is the agitation brought by Paul Singer’s activist hedge fund Elliott.” –Clara Ferreira Marques, Reuters Breakingviews

“Elliott is articulating its argument better, and with more transparency, but both sides have decent cases and claim to be doing what's best for shareholders. It's time to give those shareholders the tools to decide for themselves.” –David Fickling, Bloomberg Gadfly

“[Elliott’s] gamble on a re-rating has already paid off for many shareholders.” –David Fickling, Bloomberg Gadfly

“An oil business might once have made sense for BHP Billiton. Now it does not. The group should sell it.” –FT Lex

“BHP Billiton recently used external experts to help conduct a review of costs and benefits of unifying its Anglo-Australian dual-listed company structure into an all-Australian listing. At the very least, it’s time more information from that review was made public.” –Matt Chambers, The Australian

“A number that needs a closer look is FTI/Elliott’s claim that $US8.7bn of pent-up franking credits would be released by unifying the structure under its plan of an “Australian top hat” and premium London listing. If that number is even half right, and Elliott’s unification cost estimate of $US391m is tripled to the $US1.2bn cost that BHP’s latest review estimated, dissolving the DLC needs more investigation.” –Matt Chambers, The Australian

“BHP’s dual-listed structure, a result of the 2001 merger between the Australian half of BHP and the UK half of Billiton, means BHP Billiton as a whole has two HQs … but a single management and board. FTI’s study stated that restructuring into single listing could result in a $14.1 billion increase in market valuation and a return of $8.7 billion through improved tax credit efficiency.” –Ewen Hosie, Australian Mining

“Elliott says unifying the shares would add $US22bn of value, or 18 per cent of BHP’s market capitalisation, and would only cost $US391m. This is less than the $US1.2bn BHP, which says it has previously thoroughly investigated unification, says it would cost.” –Matt Chambers, The Australian

“The hedge fund argues that the DLC hampers BHP when it wants to make acquisitions, saying that it usually ends up paying cash instead of offering a mixture of cash and shares.” –Jon Yeomans, The Daily Telegraph

“Elliott wants it [BHP] to ditch its cumbersome dual-listed company structure… there would be some clear benefits, not least the ability to use paper to fund acquisitions and some tax advantages.” –Patrick Hosking, The Times

“Elliott Advisors is in danger of giving activist investors a good name…it has been chivvying for change at BHP Billiton and scored some palpable hits.” –Patrick Hosking, The Times

“Elliott’s decision to commission the FTI report follows conversations with numerous investors, who also want the issue to be independently assessed.” –David Stringer, Bloomberg

BHP, whose joint listing has provoked criticism for creating unnecessary complexity in the business, declined to comment yesterday on the letter…Elliott backed up its letter with the findings of an independent review from FTI Consulting, a management consultancy, which claimed that it would cost BHP Billiton $391 million to abandon the structure. The investor said that moving to a unified structure would remove a discount that exists between the price of its shares in London and those traded in Sydney.” –Robin Pagnamenta, The Times

“A further $8.7bn could be raised by tapping into so-called franking credits, which are tax breaks due to Australian shareholders that Elliott says cannot be cashed in under BHP’s current form.” –Jon Yeomans, The Daily Telegraph

“RBC Capital Markets London-based mining analyst Tyler Broda…says the unwinding of BHP's dual-listed company would provide for a cleaner structure that would be a governance positive.” –Prashant Mehra, AAP

“Analysts reckon such a move [a spin-off] could create more than $US4 billion value for shareholders.” –Sarah Thompson, Anthony Macdonald and Joyce Moullakis, Australian Financial Review

“The spin-off could fulfil the market's appetite for another big listed Australian oil and gas play, create a competitor for Woodside Petroleum whose shares are trading at a 2½ year high, ride the rising oil price and potentially unlock billions of dollars of value for BHP shareholders.” –Sarah Thompson, Anthony Macdonald and Joyce Moullakis, Australian Financial Review

“BHP’s near decade-long underperformance versus Rio Tinto was a focus of hedge fund Elliott’s 2017 campaign for a restructuring at BHP, which resulted in the miner’s announcement in August that it would try to sell its US shale business.” –Matt Chambers, The Australian

“BHP Billiton…revealed alongside its full-year results that it was putting its US shale oil and gas business up for sale. The mining titan has poured $US40 billion ($50 billion) into acquiring and running the business since 2011, entering the sector when oil was fetching more than $US100 a barrel. The division runs at a loss and a new era of lower-for-longer oil prices means BHP is only expected to recoup $US10 billion for the assets. It has also become a major distraction for investors and its poor performance was relentlessly highlighted by US activist investor Elliott Management, which had called for the division to be spun off or sold. Shareholders will be happy to see BHP rule a line under its shale disaster, while the miner’s executives will be keen for the spotlight to shift to those parts of its empire with record margins following a deep cost-cutting program.” –Peter Taylor, Jeff Whalley and John Dagge, Herald Sun

“The Elliott pitch, and the echo chamber of support that it generated from other disaffected owners, big and small, sure did help focus BHP management minds on the need for transparent urgency on just what the path being mapped out might be.” –Matthew Stevens, Australian Financial Review

“BHP bowed to pressure from investors last month, putting its lossmaking US shale oil business up for sale and delaying a move into potash.” –Neil Hume and Edward White, Financial Times

“[MacKenzie] said ‘board refreshment’ had been a topic of conversation with investors during a recent ‘listening tour’ and BHP was reviewing the metrics it uses to pick non-executive directors in light of ‘technological and other changes’.” –Neil Hume and Edward White, Financial Times

“There are still some saying the miner should have paid closer attention to the Elliott Management plan to restructure the whole business.” –Mining Journal

“This summer demonstrated the power activist shareholders can wield when FTSE 100 mining giant BHP Billiton cracked under pressure from Elliott, adopting plans to offload its US shale and gas business, which the investor had been calling for.” –Iain Withers, The Telegraph

“Some of BHP's key decisions and statements over recent weeks, such as the increased dividend and decision to exit the controversial US onshore shale assets, seemed to show that BHP had been listening to what Elliott and others had been saying, and it had acted.” –Darren Gray, The Sydney Morning Herald

“Perhaps the push from Elliott, that shareholders need to be well rewarded, has reverberated around the wider mining industry, benefiting shareholders in a range of companies in the process.” –Darren Gray, The Sydney Morning Herald

“Elliott Associates finally convinced BHP to offload its troublesome US shale assets, something that local investors also had issues with but lacked clout to act on.” –Jemima Whyte, The Australian Financial Review

“While activist shareholder Elliott (run by Paul Singer) has not yet achieved what it really wants BHP to do (that is, unify the Australian and UK listed companies into a single vehicle), its campaign is certainly bearing fruit.” –Paul Rickard, Weekend Switzer

“Shareholders can have room for optimism. Elliott has a track record of moving the goalposts.” –Marcus Leroux, The Times

“In the past, investors demanding BHP Billiton to be more cost conscious would have been batted away. But thanks to the activist wing of US funds manager Elliott Associates the company has been forced to do something.” –Philip Baker, The Australian Financial Review

“BHP chief executive Andrew Mackenzie rightly deserves praise for putting BHP on track to a brighter future, but the 2017 results cannot hide the fact that Elliott Associates was dead right in calling out the company as a chronic underperformer.” –Tony Boyd, The Australian Financial Review

“Elliott served a very useful purpose by calling out the troublesome value destructive moves that other shareholders were not willing to discuss in public. The activist’s focus on the petroleum division was well and truly warranted.” –Tony Boyd, The Australian Financial Review

“Elliott has scored plenty of goals. The most important was BHP’s decision to sell the onshore oil/gas shale (unconventional) assets in the US.” –Elizabeth Knight, The Sydney Morning Herald

“Whether a direct response to Elliott or not, the board shuffle is another victory for the activist fund.” –Robb M. Stewart, The Wall Street Journal

“Perhaps Elliott’s most palpable hit has been its argument that BHP’s US petroleum business does not sit well inside a global mining company.” –Jon Yeomans, The Sunday Telegraph

“If Elliott is only 10% correct, the “think smart” plan represents considerable value to BHP shareholders and should be considered.” –Paul Rickard, Switzer Daily

“If you have been watching commercial television lately, you will probably have seen BHP’s commercials that are branded under the Think Big tag…While it might make the staff at the Melbourne Head Office feel a little better about working for BHP, for shareholders, it is just another example of a lazy $10m being frittered away.” –Paul Rickard, Switzer Daily

“For BHP shareholders, these are interesting times as they watch their company try to achieve two objectives; growth under management’s Think Big approach, or the promise of more cash rewards under Elliott’s Think Smart campaign.” –Tim Treadgold, Mining Journal

“BHP Billiton's admission that its processes for calculating US shale impairments were deficient has attracted criticism, with one Australian shareholder saying the mea culpa was ‘manna from heaven’ for Elliott and other critics of the company.” –Peter Ker, AFR

“The sustained (but tempered) attacks from activist Elliott Management have seen BHP’s leadership publicly agree the oil and gas investments from 2011 were a bad move and the appointment of cleanskin MacKenzie as Jac Nasser’s replacement point to upcoming strategy changes.” –Mining Journal

“Some BHP owners are pleased a big investor like Elliott has come in and held management to account. Particularly in Australia, where the big beasts of mining are all-powerful in a relatively small investment market.” –Jim Armitage, Evening Standard

“Hedge fund manager Elliott Management’s ‘value unlock’ plan for BHP is starting to gain momentum, with a growing number of securities analysts and asset managers calling for the resources giant to make a more open and considered response to Elliott’s proposals.” –John Kavanagh, The Rub

“It's hard to interpret his [Ken MacKenzie’s] statement on assuming the role as anything other than an olive branch to the activists who've been pestering management” –David Fickling, Bloomberg

“Elliott is rightly critical of BHP’s lacklustre market performance, in particular compared to archrival Rio Tinto” –Pete Sweeney, Reuters Breakingviews

“Elliott and the BHP Board may not be ready yet to sit down and smoke the peace pipe, but because BHP has such a lousy record and Elliott shows no signs of going away, BHP will inevitably cede major ground on this proposal.” –Paul Rickard, Switzer Daily

The logic of BHP staying in oil and gas is hard to see, as my colleague David Fickling has argued, and Elliott's campaign has flushed out other supporters of a separation of all or part of the business. Elliott has been emboldened to call for a full-blown independent review of the unit's future.” –Chris Hughes, Bloomberg

“If there are any potential buyers who accept his invitation to chat, Mackenzie would be wise to get an auction going” –Chris Hughes, Bloomberg

“BHP’s petroleum business looks well suited to a spinoff, and the more BHP resists, the more attractive its oil wells become. The Anglo-Australian miner should see Elliott’s campaign as a compliment.” –Andy Critchlow, Reuters Breakingviews

“Were a serious bid to emerge – and the assets could be attractive for an oil major like BP or Exxon – BHP chief Andrew Mackenzie would have a tough job rebuffing it out of hand.” –Andy Critchlow, Reuters Breakingviews

“[BHP] spent some $20bn buying US shale assets six years ago and has spent a similar sum developing them – yet the returns have thus far proved disappointing.” –Ian King, Sky News

“The suggestion to spin off some of the company's U.S. petroleum assets seems quite sensible” –David Fickling, Bloomberg

“In BHP, Elliot has targeted a company that has lagged behind its mining peers during a commodity-price upswing. Elliott took particular aim at BHP’s oil-and-gas portfolio in the U.S., which has been hit with hefty write-downs in recent years and has dragged on the company’s profit amid a prolonged crude-price downturn.”—The Wall Street Journal, Rob Taylor

 “Elliott has a point: mining and oil don’t blend” –Financial Times

“Not many people outside the financial world actually understand how a dual-listed business works, but everyone can see that it is a cumbersome arrangement that carries high costs and adds nothing to the value of the business.” –Tim Treadgold, Mining Journal

“It might not take long for investors to see some value in Elliott’s unification (and spin-off) proposal.” –Tim Treadgold, Mining Journal

“Spinning out the oil business should release latent value not yet recognised in the current structure, or either of BHP’s share classes.” –FT Lex

“Splitting off BHP’s petroleum business could have some benefits. Oil peers such as EOG and Apache trade on multiples of between nine and 11 times forward EBITDA. BHP trades at about seven times, along with pure-play mining rival Rio Tinto, suggesting the benefits of owning a big oil business aren’t fully grasped by shareholders.” –Andy Critchlow, Reuters Breakingviews

“BHP’s two-headed structure is a historical accident born out of the merger of BHP and Billiton in 2001, not a strategic move.” –Andy Critchlow, Reuters Breakingviews

Updated November 29, 2018