LONDON/SYDNEY (Reuters) - Activist hedge fund Elliott Advisors on Tuesday urged BHP Billiton to reconsider its plan to restructure the company, saying it should be discussed with other investors.
U.S.-based Elliott on Monday said it had written to BHP with a plan to spin off its U.S. oil arm, return more cash to investors and ditch its dual corporate structure, but BHP said the costs outweighed any benefits, adding it would consider a more detailed response in due course.
Elliott said on Tuesday BHP had been too quick to reject the proposal and should instead think again.
“(We) struggle to understand the dismissive and premature nature of their response, especially given the considerable detail provided in our published material,” Elliott said in a statement.
Elliott says it holds a “long economic interest” of about 4.1 percent of issued shares in London-listed BHP Billiton Plc, without specifying the instruments used to build the stake. It also says it has rights with its affiliates to acquire up to 0.4 percent of the issued shares in Sydney-listed BHP Billiton Ltd.
It said it had considered earlier meetings with BHP’s management to be “constructive” and that the company should broaden the discussion to include all shareholders.
“Given the plan’s potential to unlock up to $46 billion in value, we and no doubt other shareholders of BHP look forward to management providing a more thorough and reasoned assessment of the plan.”
Brenton Saunders, portfolio manager for funds manger BT Investment Management in Sydney, said the proposed changes to the firm’s corporate structure would not be cost-effective and potentially benefit London investors over those in Australia.
Saunders said he did support the idea of selling BHP’s onshore U.S. oil assets, but that while the approach from Elliott would spur management to reassess their strategy, the hedge fund was unlikely to be able to force its plan through.
“This isn’t a shareholder that has 30-40 percent and can hold things notionally over the company. They are a significant minority at best.”
With any pressure likely to take some time to build, several London-based hedge funds spoken to by Reuters said they were steering clear for now.
“I think it’s tough for Elliott,” said one. “BHP has looked at this quite a few times and they are not keen to do it,” citing issues around tax, regulation and governance.
“I don’t think it’s impossible but I think it’s not going to be easy.”
Earlier on Tuesday, the Australian government said any major changes to the way the company is structured would need to meet a “national interest” test.
Writing by Simon Jessop, editing by David Evans