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

High street giant HSBC to close 114 branches
Personal finance

High street giant HSBC to close 114 branches

HSBC is to shut the doors of 114 branches as more customers switch to online banking.
30 Nov 2022
House prices expected to fall by 5% in 2023
House prices

House prices expected to fall by 5% in 2023

House prices could fall by 5% next year as rising mortgage rates weigh on buyer demand.
30 Nov 2022
The best offers for switching banks – get up to £200 free cash
Personal finance

The best offers for switching banks – get up to £200 free cash

Looking to move bank accounts? You can now bag as much as £200 for switching current accounts from two major banks
30 Nov 2022
Stock market crash? This time it’s (slightly) different
Stockmarkets

Stock market crash? This time it’s (slightly) different

The bears expecting a stock market crash have got it wrong, says Max King.
30 Nov 2022

Most Popular

Fan heater vs oil heater – which is cheaper?
Personal finance

Fan heater vs oil heater – which is cheaper?

Sales of portable heaters have soared, as households look to cut their energy costs. But which is better: a fan heater or an oil heater? We put them t…
21 Nov 2022
Wood-burning stove vs central heating ‒ which is cheapest?
Personal finance

Wood-burning stove vs central heating ‒ which is cheapest?

Demand for wood-burning stoves has surged as households try to reduce their heating costs this winter. But how does a wood burner compare with central…
29 Nov 2022
Best regular savings accounts – November 2022
Savings

Best regular savings accounts – November 2022

You can earn an attractive rate on the best regular savings accounts. We tell you the best on the market to take advantage of right now
29 Nov 2022