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Elliott Calls For Full Review Of BHP Unification

In a letter sent today, Elliott called on BHP Chairman Ken MacKenzie and the Board of Directors to publicly commit - by the date of announcement of the company’s half-year results on February 20th – to undertake a full, independent and transparent review of unification at BHP.

FTI Consulting, one of the world’s leading independent global business advisory firms, conducted and set out in its report an independent analysis on the benefits and costs of unification at BHP (the “Independent Report”). That report, published today along with the letter, was commissioned by Elliott in order to move the issue forward, and in response to the demands of numerous BHP shareholders around the world for these issues to be properly examined. The report highlights the next, necessary step at BHP, which is for the Board to commit to resolving the issue of BHP’s obsolete and value-destroying dual-listed company (DLC) structure.

FTI Consulting’s independent analysis found that unification would:

  • Deliver in excess of US$22 billion in value to BHP shareholders
  • Cost only c. US$391 million (including advisory fees), while preserving BHP’s ability to use PLC’s carry-forward tax loss assets following unification
  • Provide BHP with valuable strategic optionality and flexibility

Elliott is encouraged by the increase in focus on shareholder value at BHP in recent months. Those efforts include a refreshed Board, the intention to exit the U.S. Onshore assets, a commitment to delay further expansion of the Jansen Potash project, a more rigorous approach to capital allocation, and a greater commitment to listen to shareholders and to provide the market with thorough analysis of important issues.

Elliott noted in the letter that a unified BHP would finally have the flexibility to optimize shareholder value when making acquisitions, with the capacity to avoid a material portion of the value destruction which has been associated with some of BHP’s cash-only acquisitions.

Elliott also noted in the letter that unification is an important gateway for BHP to make the most of other value initiatives – such as future demergers of assets, which have attracted recent market commentary and would be made simpler under a unified BHP.

Given the magnitude of the value release opportunity of over US$22 billion outlined in the Independent Report, as well as the other benefits of unification, Elliott believes that the next logical step is for the Chairman and Board to now turn their attention to undertaking a full, independent and transparent review of unification at BHP.

The key conclusions in the Independent Report

The Independent Report provides the in-depth analysis and findings of FTI Consulting on the topic of unification of BHP’s DLC structure.

The findings in the Independent Report demonstrate that unification at BHP would, among other matters:

  • Release in excess of US$22 billion in aggregate additional value to BHP’s shareholders – equal to c. 18% of BHP’s current market capitalization – comprising:
  • a US$14.1 billion increase in BHP’s market value, reflecting the enhanced strategic, financial, organizational and structural enhancements enjoyed by a unified BHP; plus
  • US$8.7 billion of additional value unlocked from fully-franked dividends and discounted off-market buybacks undertaken by a unified BHP.
  • Only actually cost BHP c. US$391 million to achieve, including advisory fees, and can be structured to maintain the ability to use PLC’s carry-forward tax loss assets.

Unification at BHP – a critical shareholder value issue requiring prompt action

The Independent Report also demonstrates that with BHP’s income and cash position strengthening – through the positive commodities and business cycle and the potential cash proceeds from the disposal of BHP’s U.S. Onshore assets – unification would significantly help BHP to optimize the value impact of dividends and share buybacks.

The letter and the Independent Report can be downloaded at