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BHPBill note issue
BHPBill has priced a five year AUD1.0 billion note issue under its Australian Medium Term Note Program. The Australian dollar notes will pay interest at 3.00 per cent and mature in March 2020. The proceeds will be used for general corporate purposes.
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BHPBill - Demerger to simplify BHPBill
The BHPBill Board recommended shareholders approve the proposed demerger of South32 at the shareholder meetings to be held on 6 May 2015. The Board believes that with a more focused portfolio, BHPBill will be better placed to achieve further productivity benefits in its core portfolio, while creating a substantial new company, South32.
A simpler BHPBill
Today BHPBill has interests in 41 assets across 13 countries and 6 continents. The demerger materially simplifies the portfolio in a single step and is significant progress towards achieving BHPBill’s identified core portfolio of 19 assets across eight countries and three continents. This portfolio, comprising our exceptionally large long-life petroleum, copper, iron ore, coal and potash assets, collectively generated 96 per cent of the Group’s Underlying EBIT in the 2014 financial year.
South32, making a difference from the ground up
South32 will be a globally diversified metals and mining company with a significant presence in each of its major commodities. The majority of South32’s assets are located in the southern hemisphere with its two regional centres – Australia and South Africa – linked by the thirty-second parallel line of latitude. The company’s name represents this footprint and its regional approach to managing its operations.
South32’s high-quality, well managed asset portfolio:
- is diversified across five countries and produces alumina, aluminium, coal, nickel, manganese, silver, lead and zinc
- is comprised of large assets, the majority of which are competitively positioned in the first or second quartile of their respective industry cost curves
- has meaningful reserve lives to support future production without the immediate need for material incremental capital expenditure
- has been cash generative over the last three years despite falling commodity prices.
South32’s head office will be in Perth, Australia. A regional head office and global shared services centre will be located in Johannesburg, South Africa. South32 intends to adopt a tailored regional operating model which combines the management of the asset portfolio into regional business units to enable more authority to be devolved locally, reducing the size of South32’s corporate centre and facilitating greater alignment with regional stakeholders. This is expected to support better decision making at a local level and lower functional costs. South32 intends to create a distinctive culture and identity suited to its scale and requirements. By being a disciplined manager of capital and supporting industry leading health, safety, environment and community programs, South32 intends to create strong alignment with employees, communities, host governments and shareholders.
South32 will target an investment grade credit rating through the cycle and its capital structure has been developed with reference to ratings criteria published by ratings agencies. The capital structure has also been carefully designed to take into account the nature and scale of South32’s business and with the objective of South32 being well positioned to pursue value accretive investment opportunities that meet its strict financial criteria. South32’s pro forma balance sheet as at 31 December 2014 includes net debt of USD674 million, including finance leases. As at 31 December 2014, on a pro forma basis, South32’s closure and rehabilitation provisions were USD1 542 million.
The South32 dividend policy will be determined by the South32 Board at its discretion, having regard to South32’s first two priorities for cash flow, being a commitment to maintain safe and reliable operations and an intention to maintain an investment grade credit rating through the cycle. South32 intends to distribute a minimum of 40 per cent of Underlying Earnings as dividends to its shareholders following each six month reporting period, beginning from the period ending 31 December 2015. Consistent with South32’s priorities for cash flow and commitment to maximise total shareholder returns, other alternatives including special dividends, share buy-backs and high return investment opportunities will compete for excess capital.
Advantages and disadvantages of the demerger
The BHPBill Board believes that the value of both BHPBill’s and South32’s assets will be maximised if the South32 assets are separated from BHPBill. It is the view of the Board that South32’s assets will benefit from the focus of a dedicated board and management team. It will be able to adopt an independent business strategy and have the opportunity to pursue value accretive investment opportunities that may not otherwise be pursued if South32’s assets remained within BHPBill.
The Board further believes that BHPBill will achieve functional cost reductions as a result of the organisational streamlining to follow the demerger (outlined below), and in the longer term the company will derive substantial benefits through the increased management focus that will result from the simplification of its portfolio. The Board commissioned Independent Expert, Grant Samuel, to review the proposed demerger and provide an opinion as to whether the proposal is in the best interests of shareholders. The Independent Expert concluded that the benefits of the demerger clearly outweigh the disadvantages and BHPBill shareholders are likely to be better off if the demerger proceeds.
The total one-off costs of implementing the demerger are estimated to be approximately USD738 million (USD641 million after tax). These comprise stamp duty and cash tax of USD339 million, South32 set up and separation costs of USD254 million and execution costs of USD145 million, including financial advisor costs of USD30 million. With a simplified portfolio, BHPBill intends to streamline its organisational model and expects this to generate functional cost savings of approximately USD100 million (pre-tax) per annum, with 90 per cent of this saving achieved by the end of the 2017 financial year. This saving is in addition to the reduction in costs resulting from the removal of the South32 businesses. One-off restructuring costs of approximately USD55 million (pre-tax) are expected to be incurred in connection with implementing the organisational changes required to achieve these savings.
In the longer term, following the simplification of its portfolio and streamlining of organisational design, BHPBill believes it will be able to further focus on improving the performance of its core operations and achieving substantial productivity benefits beyond the USD4 billion per annum of productivity-led gains (by the end of the 2017 financial year) already targeted. BHPBill also believes that the ongoing simplification of its portfolio has been, and will continue to be, an important factor in delivering and sustaining productivity improvement. South32 is expected to incur additional costs of approximately USD60 million (pre-tax) per annum associated with operating as a stand-alone listed company relative to those incurred operating the South32 businesses as part of the BHPBill Group. However, these additional ongoing overhead costs are expected to be outweighed in the near term by the ongoing savings generated by South32’s regional model.
Demerger mechanism
The proposed demerger would be effected via a distribution of South32 shares by way of an in-specie dividend to shareholders in both BHPBill Limited and BHPBill Plc. Eligible BHPBill shareholders will receive one South32 share for every BHPBill share held on the applicable record date. South32 will apply for its shares to be admitted to trading on the ASX, LSE and JSE and will have an over-the-counter ADS program in the United States.
Approval for the demerger is being sought from shareholders. For the proposed demerger to proceed, a demerger resolution must be approved by an ordinary resolution of BHPBill shareholders (Limited and Plc) voting on a joint electorate basis. Meetings for shareholders to vote on the proposed demerger will be held on 6 May 2015 in Perth and London. The shareholder meetings will be conducted simultaneously.
Share Sale Facility
A Share Sale Facility will be established for certain eligible shareholders who hold 10 000 or fewer BHPBill shares. These investors may elect to have all the South32 shares that they receive transferred to BHPBill Limited and sold by the sale agent and the proceeds remitted to them following the demerger.
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BHPBill - demerger of South32
The following documents have today been submitted to the National Storage Mechanism and will shortly be available for inspection at www.hemscott.com/nsm.do:
- Demerger of South32 Unlocks Shareholder Value Presentation
- Demerger of South32 Shareholder Circular
- South32 Ltd. JSE Pre-listing Statement
- BHP Billiton Plc Notice of General Meeting
- BHP Billiton Plc Proxy Form (UK)
- BHP Billiton Plc Proxy Form (SAF)
- Sale Facility Form (BHP Billiton Plc UK)
- Sale Facility Form (BHP Billiton Plc SAF)
- South32 Roadshow Presentation
The documents may also be accessed via BHPBill’s website – www.bhpbilliton.com.
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BHPBill -- 2015 Interim Dividend Exchange Rates
On 24 February 2015 we determined to pay an interim dividend for the half year ended 31 December 2014 of US62 cents per share. Included in the announcement was the advice that the currency conversion for Australian cents, British pence and New Zealand cents would be based on the foreign currency exchange rates on the Record Date, 13 March 2015, and for South African cents the Last Day to Trade on the JSE Ltd., which was 6 March 2015(1). The following table details the currency exchange rates applicable for the dividend:
Exchange rate - Dividend in local currency
- Australian cents: 0.767100 - 80.823882
- British pence: 1.475500 - 42.019654
- New Zealand cents: 0.736817 - 84.145724
- South African cents: 11.797900 - 731.469800
The dividend will be paid on 31 March 2015.
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BHPBill -- AJM Conference Presentation
The following document has been submitted to the National Storage Mechanism and will shortly be available for inspection at www.hemscott.com/nsm.do:
- Australian Journal of Mining Conference Presentation
The document may also be accessed via BHPBill’s website - www.bhpbilliton.com
Delivering exceptional returns from installed capacity
BHPBill will reaffirm its ongoing commitment to safely maximising returns on installed capacity at its Western Australia Iron Ore business (WAIO) on Tuesday 10 March 2015. Speaking in Perth at the annual Global Iron Ore and Steel Forecast Conference, BHPBill President Iron Ore, Jimmy Wilson, will highlight the exceptional returns from the Company’s productivity agenda.
Mr Wilson will also reiterate WAIO is on track to achieve unit cash costs of less than USD20 per tonne(1) through a relentless pursuit of equipment availability and utilisation, efficient procurement and supply management and capital and workforce productivity.
He will also highlight BHPBill’s strong and differentiated position in the Pilbara.
BHPBill also anticipated the increasing supply of seaborne iron ore, approving the last of its major capital investments in its Pilbara infrastructure in 2011.
WAIO achieved record production of 124 million tonnes in the first half and is on track to deliver 245 million tonnes in the 2015 financial year (100 per cent basis). Further information on BHPBill can be found at: www.bhpbilliton.com.
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BHPBill interim dividend exchange rate
On 24 February 2015 we determined to pay an interim dividend for the half year ended 31 December 2014 of 62 US cents per share.
The currency exchange rate applicable for the dividend payable in South African cents to shareholders on the BHP Billiton Plc branch register is set out below:
Dividend 62 US cents per share, Exchange rate and Dividend per ordinary share in local currency
- South African cents -- 11.797900; 731.469800
The exchange rates applicable to the BHP Billiton dividend being paid in other currencies will be based on the foreign currency exchange rates on the Record Date, being 13 March 2015, and will be announced to the market.
BHPBill shareholders registered on the South African section of the register will not be able to dematerialise or rematerialise their shareholdings between the dates of 9 and 13 March 2015, both dates inclusive, nor will transfers between the UK register and the South African register be permitted between the dates of 6 and 13 March 2015, both dates inclusive.
The dividend will be paid on 31 March 2015.
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| Closing price data source: JSE Ltd. All other statistics calculated by ProfileData. |
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