According to a report by the Australian Financial Review, the largest mining company in the world by market capitalization – BHP Billiton Plc is considering a big spin-off of its nickel, manganese, and aluminium businesses into a separate division in order to increase its efficiency and become more focused on iron ore, copper, coal and petroleum, which is its core business.
BHP Billiton Plc made an official statement, cited by the Financial Times: “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. 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.”
As reported by Bloomberg, the company also said in its statement: “We continue to actively study the next phase of simplification, including structural options, but will only pursue options that maximize value for BHP Billiton shareholders.”
The company shared that its management team has set a priority of simplifying its portfolio amid a decrease in commodity prices. This explanation was made right after a news report was published, saying that the chief executives of the company have taken into consideration a possible spin-off of unwanted assets in a market listing, which could be estimated to about 20 billion Australian dollars (19 billion US dollars), separating its aluminium, nickel and bauxite assets.
BHP Billiton Plc refused to make any comments on the report in question.
The money manager Tim Schroeders commented for Bloomberg: “It probably tells you that a trade sale of some of those assets is proving more difficult than BHP would like. Going to the markets would allow BHP to rule a line under some of these businesses and might be a nice neat fit.”
A senior banker, who asked not to be identified, also commented the situation for the Financial Times: “The rationale for spinning off the assets comes down to capital allocation and the tension between the desire to boost shareholder returns and invest in new projects. It is more efficient to release these non-core assets, which are not a priority for BHP, which can then seek capital on the market.”
BHP Billiton PLC rose by 2.50% to 1 890.18 pence by 12:07 GMT in London, marking a one-year change of -1.30%. The company is valued at 103.87 billion pounds.
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