BHP Billiton has rejected a proposal from US hedge fund firm Elliott Associates to alter its company structure and divest its US petroleum assets.
Elliott’s proposal called on BHP to change its Dual Listed Company structure, asset portfolio and capital management.
It suggested BHP should operate under a single UK based company listed in London and demerge its US petroleum assets into a separate entity listed on the New York Stock Exchange.
This demerger is based on the idea that investors would assign a higher value for the assets if they are listed separately.
The proposal also includes BHP buying back shares based on a formula, rather than taking into account the cyclical nature of the resources industry or the returns gained for other uses of funds.
“After reviewing the elements of Elliott’s proposal, we have concluded that the costs and associated risks of Elliott’s proposal would significantly outweigh any potential benefits,” BHP said.
Since the DLC was formed in 2001, it has returned around $US23 billion in buybacks of BHP Billiton and BHP Billiton Plc shares and approximately US$56 billion in cash dividends.
BHP has reduced its asset portfolio by more than one third since 2013, through its divestment of South32 and by selling more than $US7 billion worth of assets.