BHP opts for a London listing after all

BHP Billiton is considering an extra listing in London for what is set to be mining’s biggest spinoff, marking the latest management U-turn in an industry that is having to respond to rising shareholder activism.

“We have been pleased by the support for the de-merger and the level of interest investors have shown in the new company,” chairman Jacques Nasser wrote in a letter to investors.

Given the level of interest, a London listing is being studied on top of those planned in Sydney and Johannesburg, he wrote, according to an extract e-mailed yesterday. The letter followed meetings with investors including UK holders who might have been barred from owning the new stock.

BHP CEO Andrew Mackenzie said on the day the original spinoff was announced that the company would not be pursuing a London listing because of the cost and complexity.

Yesterday’s change of mind by the world’s biggest mining company is the latest example of heightened investor activism in the industry, where shareholders have been campaigning for greater returns following years of failed transactions and investment in new mines that did not pay off. Last week investors including hedge-fund billionaire John Paulson forced Anglo Gold Ashanti to scrap a planned $2.1bn share sale.

“The concern was many UK holders would not be mandated to hold the Australian and South African listed spin-off, hence they would have to sell on listing, perhaps at an unfavourable level,” Richard Knights, an analyst at Liberum Capital, said yesterday.

“A listing in London is good for the UK market and for UK shareholders.”

The new company may be worth about $15bn when listed and be mining industry’s biggest spin-off in at least a decade, according to CLSA Asia-Pacific Markets. BHP’s London shares fell the most in almost three years the day the spin-off was announced as the company also decided to skip a widely anticipated share buyback.

London would be added to Johannesburg as the new company’s secondary listings. The Australian Stock Exchange will be its primary listing.