BHP mulls split from non-core business

Mining giant BHP Billiton is reportedly considering a plan which would see its nickel, manganese and aluminium businesses moved to a separate, $20 billion firm.

BHP’s Worsley alumina operation in WA

Early reports that the mining company’s board were considering splitting the business were at least partly confirmed on Tuesday, when the miner released a statement on the ASX.

“As we have said previously, the simplification of our portfolio is a priority and is something we have pursued for several years,” the company said. “In the last two years alone, the Group has announced or completed divestments in Australia, the United States, Canada, South Africa and the United Kingdom”.

Once an extraordinarily diverse business, BHP Billiton has in recent years moved to focus on what it calls its four or five ‘pillars’ of core business: iron ore, copper, coal and oil & gas, with potash being the potential fifth.

“We believe that a portfolio focused on our major iron ore, copper, coal and petroleum assets would retain the benefits of diversification, generate stronger growth in free cash flow and a superior return on investment,” the board said.

“By increasing our focus on these four pillars, with potash as a potential fifth, we will be able to more quickly improve the productivity and performance of our largest businesses.”

The speculation, and subsequent announcement, gave BHP a healthy jump this week on the stock market.

The miner’s share price, which opened on Monday at $36.14, closed overnight on Wednesday at $37.37.

BHP is reportedly preparing to seek an exemption from the Australian Taxation Office if it does indeed go ahead with a demerger. A source reportedly told Fairfax Media that the miner’s global tax team was playing a central role in the developing plans, particularly if the new company was listed in Australia, Britain and South Africa.

“We continue to actively study the next phase of simplification, including structural options,” BHP continued on Tuesday, “but will only pursue options that maximise value for BHP Billiton shareholders.

“Any course of action remains subject to detailed review and an assessment of alternatives.”

Source from here