BHP Billiton (BBL) Shares Pressured by Demerger

Shares of BHP Billiton Plc (BBL) were off -3.59 or -5.16 percent to $65.93 per share in premarket trading this morning, while BHP Billiton Ltd (BHP) shares were off -2.58 or -3.55 percent to $70.18 per share in the premarket. The two stocks of the metals giant sold off after news that the company would be spinning off assets to form a new global mining and metals company.

BHP Billiton Plc stock closed at $69.52 per share, up +0.32 or +0.46 percent, while BHP Billiton Ltd closed at $72.76 per share, up +0.31 or +0.43 percent in Monday's regular trading session.

Melbourne, Australia based BHP Billiton Plc and Ltd is a multinational mining, metals and petroleum company and the largest mining company in the world by revenue. The company was formed by the 2001 merger of the Australian Broken Hill Proprietary Company Ltd or BHP, and the Anglo/Dutch Billiton Plc. The company was then dually listed on the Australian Securities Exchange and the London Stock Exchange. The Australian shares (BBL) represent the largest company in Australia by market capitalization, while the London listing (BHP) is a component of the FTSE 100 and the 9th largest company listed on the London Stock Exchange.

BHP Billiton announced early this morning that it would be forming a new global company around its coal, aluminum, nickel, manganese and silver assets in a demerger leaving the parent company, BHP Billiton to concentrate on its copper, coal, petroleum and long-life iron ore and potash basins.

The new company, based in Perth, Australia will have BHP's current Chief Financial Officer, Graham Kerr as Chief Executive and David Crawford as Chairman. The company will have approximately $15 billion in assets, with the demerger scheduled to be completed by the first half of 2015. The assets include the company's Cannington lead and silver mines and Illawara thermal coal mines in Australia; nickel mines in South Africa and Columbia and their South African coal division

BHP Billiton Chief Executive Officer, Andrew Mackenzie said in a statement that, "With a simpler portfolio, we are targeting sustainable, productivity-led gains of at least $3.5B per annum by the end of the 2017 financial year . BHP Billiton Chairman, Jacques A. Nasser said that, "We believe the proposed demerger, if implemented, will accelerate the simplification of the group's portfolio, provide investors with choice and unlock value in both companies .

The new company's shares will be spun off to BHP's existing shareholder that will receive 100 percent of the new stock. The stock is expected to be listed in Australia with a possible secondary offering in South Africa and American Depository Receipts or ADRs for trading in the United States.

In a separate news release, BHP Billiton showed a +23.2 percent rise in fiscal year 2014 profits to $13.8 billion, versus $11.2 billion one year ago. Despite the earnings news, both BHP Billiton stocks are selling off in the premarket and will probably continue selling off in the regular trading session. BHP Billiton shares had been +1.4 percent higher before the announcement overseas on expectations the company would announce a share buyback plan along with the demerger.

Other News About BHP Billiton Plc
BHP Billiton to Restructure Asset Portfolio
Company was planning on trimming down assets last week.
BHP Billiton earnings reach $13.4b
Company reports earnings which missed analyst expectations.

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Published on Aug 19, 2014
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2020. Content published with author's permission.

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