BHP Billiton set to spin off assets in deal worth €15bn

Diversified mining company BHP Billiton indicated its preference for a demerger of its aluminium, manganese and nickel assets yesterday, setting the stage for the formation of a separate business that could be worth at least Australian $12 billion (€15 billion).

BHP said its board was considering a spin-off at meetings ahead of its annual results announcement next week. An Australian newspaper said those plans were well advanced and would include the Nickel West business that the world’s biggest miner has been trying to sell.

“A demerger of a selection of assets is our preferred option,” said the company, which has a market capitalisation of $185 billion, in a statement to the Australian stock exchange.

BHP has long aimed to sell or spin off its manganese, aluminium and nickel assets, which contribute little to its earnings. Simplifying the company would “generate stronger growth in cash flow and a superior return on investment”, it said.

Some of the largest shareholders in BHP welcomed the announcement.

“It’s good to see BHP taking the lead in the sector on this. It reassures you as a shareholder. It makes me more willing to have it as a significant bet within my fund,” said Christopher Moore, portfolio manager of Fidelity Global Industrials Fund.

“Really we should see more of this in the mining sector. I would expect others to take BHP’s lead. Rio Tinto, Anglo American could also follow suit in doing this.”

BHP’s rivals Anglo American and Rio Tinto have said they would focus on the parts of their portfolio that can deliver higher return.

BHP is likely to offload between $1.0-2.7 billion of its debt to the new vehicle, according to analysts. Any more than that could be challenging to handle for a company that relies on assets whose profitability can be volatile.

Its net debt as of December 30th was $27.1 billion. – (Reuters)