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The UK’s blue-chip FTSE 100 index is set to lose its largest company after miner BHP said it would unify its two-company structure and move its main stock exchange listing to Australia.
The move was announced as BHP unveiled an oil and gas exit deal on Tuesday by merging the company with Australia’s Woodside Petroleum. It also declared a record final dividend of $ 10.1 billion as profits soared on soaring commodity prices.
The unification of the company’s complex dual-listed structure – which includes Sydney-listed BHP Ltd and London-listed BHP Plc – coupled with the exit from oil are among the most radical corporate changes in its history.
They come as chief executive Mike Henry tries to shift BHP’s focus to metals such as copper and nickel, as well as green commodities. The company also said Tuesday that its board of directors had approved plans to develop Jansen, a $ 5.7 billion potash project in Canada.
Henry told the Financial Times that now is the time to move to a simpler business structure that would allow the business to grow.
“One of the reasons I’m in the UK is that I don’t want people to misinterpret unification as an indication that we are pulling out of the UK. We will still have a [secondary listing here]”Henry told the Financial Times.
“I hope shareholders will see the wisdom of the company in terms of simplifying the structure of the company. . . and what that means for long term growth â€.
BHP shares rose 8.3% to £ 24.71 at the start of trading in London on Tuesday.
“The big news is the unification and expected reduction in the 16% discount that the LSE line trades against the ASX line, which we believe results in outperformance,†Berenberg analysts said, referring to the increase in the share price.
BHP is the largest company by market value on the London Stock Exchange and the unification of its dual listing structure will result in the transfer of its primary listing to the Australian Stock Exchange.
Under the existing rules, BHP will be removed from the blue chip FTSE 100 index and due to their investment mandates, many UK shareholders will be forced to sell. The unification will require shareholder approval.
BHP said underlying attributable profit, a measure tracked by analysts, was just over $ 17 billion in the year through June, up from $ 9 billion in the period. 12 months prior, for revenues of nearly $ 61 billion.
Strong cash generation enabled the company to declare a final dividend of $ 2 per share, or $ 10.1 billion, bringing its total payout for the year to $ 15 billion. Last year, BHP announced total dividends of $ 1.20 per share or $ 6.1 billion.
Net debt stood at $ 4.1 billion, up from $ 11.8 billion at the end of 2020. Iron ore and copper in steel raw materials were the main driver of profits.
BHP is the latest big miner to release the results of what has been a bumper profit season as the industry has emerged as a major beneficiary of China’s rapid economic recovery from the coronavirus pandemic. Stimulus measures in major economies have also helped fuel strong demand for commodities, pushing prices up sharply.
The merger of BHP’s oil business with Woodside comes as large mining companies face pressure to reduce their exposure to fossil fuels and align with the goals of the Paris climate agreement. BHP is also looking for a buyer for its latest thermal coal mine.
“The merger of our oil business with Woodside will create one of the top 10 independent energy companies in the world, unlocking value for BHP shareholders, including through synergies, and a stronger, more resilient combined business that will be better. placed to keep increasing the value as it is browsed. energy transition, â€said Henry.
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