BHP Billiton has announced plans to spin off businesses worth an estimated $16 billion, most of them acquired in its 2001 merger with Billiton. As Sonia Legg reports the world's biggest mining company plans to focus on its most profitable activities.
Thirteen years after BHP and Billiton merged mining investors are in a spin. The world's largest mining company is creating a separate business for some of its operations, including manganese, nickel and aluminium. The spin-off - temporarily called NewCo - will be worth an estimated $16 billion. The move will simplify BHP around four pillars - iron ore, copper, coal and petroleum - at time when commodity prices are falling. But Swaha Pattanaik from Reuters Breakingviews says it hasn't been welcomed by all investors - BHP's london listed shares fell 4% (SOUNDBITE) (English): SWAHA PATTANAIK, COLUMNIST, REUTERS BREAKINGVIEWS, SAYING: "Nickel is looking like the best performing metal so far this year - up by a third - aluminium is not doing too shabbily either - they are up about 12%. There are very special factors at work though and it's not clear whether it will hold up for one thing and even if you do there may be better ways to play if you want to do a pure commodity play" The share price fall was partly linked to BHP's second-half results - underlying profit was up 8% to almost $5.7 billion, but it missed estimates. The lack of an expected share buyback also disappointed. Investors had been expecting a $5 billion windfall. Interest in the new company may be limited too. (SOUNDBITE) (English): SWAHA PATTANAIK, COLUMNIST, REUTERS BREAKINGVIEWS, SAYING: "There is going to be no London listing for the NewCo in which case it is not clear what will happen to the people in London who don't want to hold Johannesburg as secondary listing or Australia its primary listing." BHP's current CFO Graham Kerr will head the new company. And the $16bln valuation is only an estimate - all BHP would say is that NewCo's business achieved a profit margin of 21 percent in the 2014 financial year and would carry minimal debt.