BHP Billiton warns of high cost of Elliott proposals

BHP Billiton has warned that all shareholders would lose if it replaced its dual listed company structure with a single UK incorporated company as proposed by Elliott Associates and Elliott International.

The company said the board and management regularly reviewed the DLC structure and its portfolio of assets so as to optimise long-term value for all shareholders and the company had simplified its business in recent years.

Chief executive Andrew Mackenzie said: “BHP Billiton is now a stronger, simpler company, well-positioned for future economic conditions.

“We are confident we have everything in place to increase returns and significantly grow shareholder value.”

BHP Billiton said Elliott’s proposals were not new to the group and it had assessed in detail many times over the past years options to unify the DLC structure and enhancements to its portfolio, including divestment of Petroleum.

A statement said: “Consistent with our capital allocation framework, we regularly consider buybacks as an alternative use for our excess cash.

“Management has been engaged in discussions with Elliott over many months on its proposals and is familiar with the views expressed by Elliott.

“The elements of Elliott’s proposal have also been considered by the board.

“Against the background of the ongoing assessment by the board and management of our DLC, our portfolio of assets and the capital allocation framework, we have provided detailed feedback to Elliott on the challenges inherent in their proposals.

“The board and management have concluded that the costs and associated disadvantages of each element of Elliott’s proposal would significantly outweigh the potential benefits.

“We believe that Elliott materially overstates the potential value that could be created by its proposals.”

It said that unifying the DLC structure in the manner proposed by Elliott could destroy at least US$1.3 billion in value to save less than US$2.5 million a year – for no identifiable material or strategic benefit.

It also said that petroleum remained core to the group’s strategy and had the potential to create significant long term value at high returns.

It added: “With our strong business plan, our view is that the Petroleum business as a part of the BHP Billiton portfolio currently offers more value to shareholders than if it were a separate entity.”

It continued: “Share buybacks are a core element of our capital allocation framework.

“We have returned to shareholders approximately US$23 billion in buybacks, and approximately US$56 billion in dividends since the formation of the DLC.

“Decisions on buybacks need to consider the cyclical nature of the resources industry and returns available from other uses of cash.”

At 8:23am: (LON:BLT) BHP Billiton PLC share price was -3.25p at 1311.25p

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