The UK’s blue-chip FTSE 100 index is set to lose its biggest company after miner BHP said it would unify its dual-corporate structure and shift its primary stock market listing to Australia.
The move was announced as BHP on Tuesday unveiled a deal to exit oil and gas by merging this business with Australia’s Woodside Petroleum. It also declared a record final dividend of $10.1 billion (€8.5bn) as profits soared on surging commodity prices.
The unification of the company’s complex dual-listed structure – which comprises BHP Ltd listed in Sydney and BHP Plc listed in London – coupled with the exit from petroleum are some of the most radical corporate changes in its history.
They come as chief executive Mike Henry tries to shift BHP’s focus toward metals such as copper and nickel, as well as green commodities. The company also said on Tuesday its board had approved plans to develop Jansen, a $5.7 billion potash project in Canada.
Structure
Mr Henry said that now was the right time to move to a simpler corporate structure that would allow the company to grow.
“One of the reasons I am in the UK is that I don’t want people to misinterpret unification as being any indication that we are withdrawing from the UK. We will still have a [secondary listing here],” Mr Henry said.
“I am hopeful shareholders will see the wisdom for the company in terms of simplifying the corporate structure...and what that means for long-term growth..
Shares in BHP rose 8.3 per cent to £24.71 (€29.11) in early trading in London on Tuesday.
“The big news is unification, and the hoped narrowing of the 16 per cent discount that the LSE line trades at versus the ASX line, which we think is driving outperformance,” said analysts at Berenberg, referring to the share price rise.
BHP is the biggest company by market value on the London Stock Exchange and the unification of its dual-listed structure will involve its primary listing shifting to Australia’s stock exchange.
Under existing rules that will mean BHP will be removed from the blue-chip FTSE 100 index, and because of their investment mandates many UK shareholders will be forced to sell. The unification will require shareholder approval.
BHP said underlying attributable profit, a measure tracked by analysts, was just over $17 billion in the year to June, up from $9 billion in the preceding 12-month period, on revenues of almost $61 billion.
Strong cash generation enabled the company to declare a final dividend of $2 per share, or $10.1 billion, taking its total payout for the year to $15 billion. Last year BHP announced total dividends of $1.20 a share or $6.1 billion.
Net debt stood at $4.1 billion, down from $11.8 billion at the end of 2020. Steelmaking commodity iron ore and copper were the main driver of profits.
Results
BHP is the final big miner to report results in what has been a bumper earnings season as the industry has emerged as one of the biggest beneficiaries of China’s rapid economic recovery from the coronavirus pandemic. Stimulus measures across big economies have also helped fuel strong demand for commodities, sending prices sharply higher.
The merger of BHP’s oil business with Woodside comes as big mining companies face pressure to reduce their exposure to fossil fuels and align with the goals of the Paris climate agreement. BHP is also seeking a buyer for its last thermal coal mine.
“The merger of our petroleum business with Woodside will create a top 10 global independent energy company, unlocking value for BHP shareholders, including through synergies, and a stronger, more resilient combined business that will be better positioned to continue to grow value as it navigates the energy transition,” said Mr Henry. – Copyright The Financial Times Limited 2021
