BHP Billiton takes a vote on South32

South 32 – the company being spun off from BHP Billiton in mining’s biggest deal in a decade - is primed for acquisition after 97% of shareholders supported the change yesterday.

“If we do go into the M&A space, it will be opportunistic and it will only be where we see value,” chief executive officer-elect Graham Kerr said yesterday. “We’ll only pursue it if we have a mandate from investors.”

BHP shareholders met yesterday in Perth to approve the creation of South32, which will become the world’s largest producer of manganese ore and operate the biggest silver mine, under a plan that would see its shares start trading May 18 in Australia, the UK and South Africa.

“I’d be very surprised if there’s not an incredibly strong vote,” Kerr said. “I expected strong support, and I think my expectations have been well and truly surpassed.”

The company may be worth $11.9 billion, according to the median estimate from five analysts. That would make it mining’s second-largest spinoff, behind MMC Norilsk Nickel’s $14.4 billion transaction to carve out Polyus Gold in 2006.

Banks from Investec to JPMorgan Chase have cut estimates on South32’s valuation as commodity prices have tumbled on oversupply and slower growth in China. Weaker prices could lower South32’s valuation and also make it more susceptible to takeover approaches, according to Investec.

“The way people value South32 will be driven by their view on commodity prices,” Kerr said. “Anyone who is interested in us has the same challenge.”

Shedding the collection of smaller assets is aimed at helping BHP accelerate cost cutting and exceed a target of producing annual efficiency gains of $4 billion from mid-2017, CEO Andrew Mackenzie said last month.

Investors will receive one South32 share for each BHP one they own. – Bloomberg

I’d be very surprised if there’s not an incredibly strong vote. I expected strong support, and I think my expectations have been well and truly surpassed Graham Kerr Chief executive officer- elect