Publicado 10/04/2017 8:06:25CET
BHP's management has a remarkable opportunity to significantly enhance shareholder value. We urge each of you, consistent with your duties as directors of BHP, to review the Value Unlock Plan in light of the very real and measurable benefits which we believe they can have for BHP's shareholders.
Given that our analysis shows that implementation of the Value Unlock Plan could provide BHP's shareholders with an increase in the value attributable to their shareholdings of up to c. 48.6% (Limited shareholders) / c. 51.0% (PLC shareholders), we expect that a full and open review of our plan by management in the near term would be welcomed by an overwhelming majority of BHP's owners.
We look forward to you as BHP's directors announcing on a timely basis the start of your work in formally reviewing the Value Unlock Plan, along with a commitment to publishing within a reasonable timeframe the details of the scope and results of that review.
Elliott Advisors (HK) Limited
Independent analysts' comments on DLC issues
"DLC Structures are not permanent. Based on our analysis we have seen that DLC structures are not intended to be permanent structures and nor are they beneficial for shareholders forever. We believe that now is an appropriate time for BHP to consider unifying the DLC structure." - UBS, July 14, 2014
"[A] collapse of the DLC such that all shareholders are holders of Ltd shares, would see all dividends utilise franking credits going forward. We believe that BHP will be capable of maintaining the fully franked divided to all shareholders following a collapse of the DLC, given that the bulk of earnings are generated by the Australian assets (in particular iron ore) and the payout ratio should be maintained at ~50%." - UBS, July 14, 2014
"New proposal will lead to wastage of future franking credits...: Australian shareholders can benefit from tax relief on dividends ("franking credits"). Under the proposed change to the dividend funding mechanism, Ltd's dividends to plc would have franking credits attached, but these credits can only be monetized by Australian shareholders. At 30th June, BHP Ltd had
$10.9bn of franking credits, equivalent to ~4 years of fully franked Ltd dividends. We believe certain Australian shareholders may consider the leakage of franking credits to plc shareholders, which they are unable to monitise, as disadvantaging Ltd shareholders." - JP Morgan - September 22, 2015
Independent analysts' comments on BHP's US petroleum business
"We have always struggled with US onshore asset as in our view they do not fit in BHP's strategy of building large scale low cost tier 1 assets and are arguably worth more to someone else." - Citigroup - April 22, 2016
"On strategy, we think there is no real benefit from portfolio diversification per se and unless we see a dramatic outperformance of oil versus iron ore (clearly not the case at present) we see no reason for BHP to trade ahead of Rio Tinto." - Bernstein - January 5, 2017
Independent analysts' comments on capital returns
"If the DLC were to be collapsed, then every dollar returned via a buyback would be done through the buyback of Ltd shares which provided sufficient franking credits existed, could be done at a ~14% discount to the prevailing share price on the day. This is more accretive than buying back Plc shares as the discount at which Plc shares trade to Ltd shares has historically been narrower than 14%. The off-market buyback of Ltd shares also enables distribution of franking credits to shareholders that can utilise them" - UBS - July 14, 2014
"Despite >US$30b spent, failed tilts at RIO and Potash Corp and overpaying for US Shale suggest M&A is not BHP's raison d'etre." - Citigroup - May 27, 2016
"At spot prices BHP would have even stronger free cash flow generation, largely thanks to iron ore, and be able to significantly increase shareholder returns. Dividend yield could increase to >6% and even if a more conservative balance sheet was run it would still allow for ~US$5b to be returned per year." - Citigroup - Feb 21, 2017
This letter is provided solely by Elliott. Many of the statements in this letter are the opinions, interpretations and/or beliefs of Elliott which are based on its own analysis of publicly available information. Elliott is expressing those opinions, interpretations and beliefs solely in its capacity as an investment adviser to the Elliott Funds. Any statement or opinion expressed or implied in this letter is provided in good faith but only on the basis that no investment decision(s) will be made based on, or other reliance will be placed on, any of the contents herein by others. Nothing in this letter, the enclosed presentation or in any related materials is a statement of or indicates or implies any specific or probable value outcome for BHP's shareholders in any particular circumstance. Certain statements and opinions expressed or implied in this letter are necessarily based on or involve assumptions, because not all information on BHP is publically available. If any of these assumptions are incorrect, it could cause our statements and/or opinions to differ materially.
The Elliott Funds, together with certain of their affiliates, hold a long economic interest in respect of approximately 4.1% of the issued share capital of PLC. The Elliott Funds and/or any of their respective affiliates (i) may at any time in the future, without notice to any person (other than as required under, or in compliance with, applicable laws and regulations), increase or reduce their holdings of any BHP entity's shares or other equity or debt securities and/or may at any time have long, short, neutral or no economic or other exposure in respect of any BHP entity's shares or other equity or debt securities; and/or (ii) may now have and/or at any time in the future, without notice to any person (other than as required under, or in compliance with, applicable laws and regulations), may establish, increase and/or decrease long or short positions in respect of or related to any BHP entity's shares or other equity or debt securities, in each case irrespective of whether or not all or any part of the Value Unlock Plan is, or is expected to be, implemented. As a result of its arrangements with the Elliott Funds and/or their affiliates, Elliott has a financial interest in the profitability of the Elliott Funds' positions in or relating to BHP.
This letter is published solely for informational purposes and is not, and should not be construed as, investment, financial, legal, tax or other advice or recommendations. This letter is not intended to be and does not constitute or contain any investment recommendation as defined by Regulation (EU) No 596/2014. No information in this letter should be construed as recommending or suggesting an investment strategy.
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(i) purport to be complete or comprehensive; or
(ii) constitute an agreement, offer, a solicitation of an offer, or any advice or recommendation to enter into or conclude any transaction or take or refrain from taking any other course of action (whether on the terms shown herein or otherwise).
The market data contained in or utilized for the purposes of preparing this letter is (unless otherwise specified) as at the end of trading hours on April 7, 2017. Changes may have occurred or may occur with respect to such market data and neither the Elliott Funds, nor Elliott, nor any of their respective affiliates is under any obligation to provide any updated or additional information or to correct any inaccuracies in this letter.