What’s behind BHP’s move from London to Sydney?

BHP, the world’s largest mining company, is moving its primary stockmarket listing from London to Sydney. Saloni Sardana looks at what’s going on and what it could mean for UK investors.

The FTSE 100, the UK’s flagship stockmarket index, is set to lose its biggest company, after mining giant BHP said it is moving its primary listing from London to Sydney. 

At present BHP, has a dual-class structure with a primary listing in London, and secondary listing in Sydney. 

So why is BHP doing this and what may it mean for you?

What is BHP doing?

BHP is a resource extraction firm – the world’s largest mining company. Its core businesses is mining metals, minerals, oil and gas. 

That being said, at the same time as announcing its move back to Sydney, BHP also said it plans to abandon fossil fuels by selling its oil and gas operations to Australian company Woodside Petroleum. 

The announcements come as BHP reported its best profit in more than a decade and a record-breaking dividend of $2 (£1.45) a share on the back of soaring iron ore prices. The company also said it was ploughing ahead with its Jansen potash project in Canada. 

What was the previous arrangement? 

BHP is currently split into two legal entities: BHP Plc which is listed in London, and BHP Group Ltd whose shares are listed in Sydney. Both entities will be simplified and merged into one. 

The changes are the most radical in the history of the company, and follow a similar restructuring to that of consumer giant Unilever in 2018. Unilever initially said it would merge its two businesses into one to be listed in Amsterdam. However,  the company was forced to U-turn on those plans following protests from UK shareholders. 

It is unlikely, however, that opposition from UK shareholders will force BHP to backtrack. As Sky News puts it: “For a start, BHP is not really an established stalwart of UK business in the way that Unilever is, but is chiefly an Australian business.”

So why is BHP moving to Sydney? 

There could be plenty of reasons, of course. But Mike Henry, the company’s chief executive, told the Financial Times that the simpler corporate structure would make it easier for the company to grow. That may be partly true, but it is likely that Australia’s less stringent environmental requirements compared to UK standards acted as an incentive to move. Henry is also trying to enhance BHP’s focus on commodities such as nickel, copper and fertilisers. 

Another reason may be to close the gap between Australian shares and UK-listed shares. BHP’s London-listed shares trade at a discount to their Australian counterparts because Australian investors gain from a mechanism called “dividend franking”, which is a tax credit that averts double taxation as it recognises that dividends are paid from profits that have already been subject to tax. 

What does this mean for investors? 

As Bloomberg says: “The deletion from the FTSE 100 will also prompt asset managers and exchange-traded funds which track the benchmark to sell their holdings in BHP.”

So there are concerns that several UK investors may have to sell their shares. 

All in all, it is unlikely to be a big deal in the longer-run, but in the short term it may cause more selling. 

Shares in BHP rose around more than 5% on the news, but have fallen back since.

Recommended

The US Federal Reserve is about to rein in its money-printing – what does that mean for markets?
US Economy

The US Federal Reserve is about to rein in its money-printing – what does that mean for markets?

America’s central bank is talking surprisingly tough about tightening monetary policy. And it’s not the only one. John Stepek looks at what it all mea…
23 Sep 2021
The uranium price is soaring – here’s the best way to play it now
Energy

The uranium price is soaring – here’s the best way to play it now

Uranium, the key ingredient to nuclear power, has been ignored since the bubble of 2006, but now the uranium price is rising again. Dominic Frisby exp…
22 Sep 2021
I wish I knew what contagion was, but I’m too embarrassed to ask
Too embarrassed to ask

I wish I knew what contagion was, but I’m too embarrassed to ask

Most of us probably know what “contagion” is in a biological sense. But it also crops up in financial markets. Here's what it means.
21 Sep 2021
Why is the UK short of CO2 and what does it mean for you?
UK Economy

Why is the UK short of CO2 and what does it mean for you?

The UK is experiencing a carbon dioxide shortage that could lead to empty shelves in supermarkets. Saloni Sardana explains what’s going on and how it …
21 Sep 2021

Most Popular

The times may be changing, but don’t change how you invest
Small cap stocks

The times may be changing, but don’t change how you invest

We are living in strange times. But the basics of investing remain the same: buy fairly-priced stocks that can provide an income. And there are few be…
13 Sep 2021
Two shipping funds to buy for steady income
Investment trusts

Two shipping funds to buy for steady income

Returns from owning ships are volatile, but these two investment trusts are trying to make the sector less risky.
7 Sep 2021
Should investors be worried about stagflation?
US Economy

Should investors be worried about stagflation?

The latest US employment data has raised the ugly spectre of “stagflation” – weak growth and high inflation. John Stepek looks at what’s going on and …
6 Sep 2021