BHP Billiton announces plan to spin off some assets

August 18, 2014

BHP Billiton announced that it will split its company and spin off its second tier assets into a new corporation. The announcement, made to the Australian Securities Exchange confirmed long running speculation about the split, ABC News reported.

The company, the largest mining group in the world, said it had explored whether to sell its "non-core" assets or house them in a new company and had opted for a demerger.

"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 cash flow and a superior return on investment," the company said.

"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."

Investors immediately approved the concept with BHP shares lifting 2.3 percent after the announcement, and settling 89c higher at $39.05 after peaking at $39.20.

The proposed new company is likely to have assets worth between $14 billion and $20 billion, making it one of Australia's largest mining groups.

But it would still be dwarfed by BHP which today is valued at almost $202 billion.

"BHP Billiton has been simplifying its portfolio for over a decade and is pursuing options to make the company simpler and more productive," the company said.

After a decade of expansions and multi-billion-dollar takeovers, BHP and its rivals like Rio Tinto shifted into cost-cutting mode almost two years ago when it became apparent that the heady days of the resources boom were behind them.

Along with cost cutting and a search for efficiency, they have been desperately seeking buyers for lower quality assets in a bid to deliver better returns to shareholders.


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