BHP Billiton shareholders get bigger stake

$10.4 billion return from asset sales

LOCAL shareholders of mining giant BHP Billiton stand to hold a larger stake in the company after it kept its promise yesterday to return $10.4 billion (R153bn) from the sale of its Eagle Ford, Haynesville and Permian onshore US oil and gas assets for $10.5bn.

The pledge will bring the total amount returned to shareholders to R308.9bn in the past two years. “For local shareholders the benefit is in buying back the shares, each shareholder will now be owning a bigger part of the company,” said Mergence Investment Managers analyst Izak van Niekerk.

BHP Billiton in July announced the sale of its onshore US oil and gas assets with BP American Production, a subsidiary of energy major BP, acquiring all the issued share capital of Petrohawk Energy, which holds the Eagle Ford, Haynesville and Permian assets.

Merit Energy Company acquired BHP Billiton’s interest in the BHP Billiton Petroleum (Arkansas) and its membership interest in BHP Billiton Petroleum (Fayetteville), which holds the Fayetteville assets.

The programme will commence immediately with BHP Billiton targeting an off-market buy-back of $5.2bn of BHP Billiton shares under which BHP Billiton can buy back shares at up to a 14 percent discount.

BHP Billiton intends to pay the balance of the net proceeds from the sale of its onshore US assets to all shareholders in the form of a special dividend to be determined following completion of the off-market buy-back and to be payable in January.

“There are no concerns around debt and ability to continue. What is new is how they will return the money to their shareholders,” Van Niekerk said. He said BHP Billiton realised that the assets had much lower returns than the rest of the business and were under performing, hence the reason to sell.

“We made a commitment that all the net proceeds from the disposal of our onshore US assets would be returned to shareholders and we are honouring that commitment now that the sale transactions have been completed,” said BHP Billiton chief executive Andrew Mackenzie, adding that returning $10.4bn to shareholders would bring the total cash returned to shareholders to $21bn over the past two years.

The group said it was likely that the BHP Billiton shares could be sold on the market at a price that would be higher than the buy-back price, as shareholders were being invited to tender shares into the off-market buyback at discounts to the market price.

“However, for some shareholders, depending on their individual circumstances, the off-market buy-back may provide a greater after-tax return than the return from selling their shares on-market,” the group said.

The group’s shares closed 2.05 percent higher at R302.95 on the JSE yesterday.