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BHP BILLITON - DETAILS FOR FIRST PHASE OF US$2 BILLION CAPITAL MANAGEMENT
PROGRAMME
BHP BILLITON PLC
Registration number 3196209
Registered in England and Wales
SHARE CODE: BIL
ISIN: GB0000566504
BHP BILLITON ANNOUNCES DETAILS FOR FIRST PHASE OF US$2 BILLION CAPITAL
MANAGEMENT PROGRAMME
On 18 August 2004, BHP Billiton announced its intention to return up to US$2
billion of capital to shareholders, in addition to its ongoing progressive
dividend policy. BHP Billiton today is announcing the details for the first
phase of this capital management programme.
The programme will commence with an invitation to eligible shareholders in BHP
Billiton Limited to participate in an off-market buy-back of between A$1.0 and
A$1.5 billion (approximately US$0.7 to US$1.1 billion).
Following completion of the off-market buy-back, BHP Billiton will consider
alternatives for returning the balance of the US$2 billion to shareholders
within the next 12 months through further share buy-backs in either BHP Billiton
Plc or BHP Billiton Limited and/or enhanced dividends. The form that the balance
of the return of capital will take will depend on an assessment of market
conditions at the time.
BHP Billiton`s Chairman, Don Argus, said that the return of capital is
consistent with the company`s commitment to demonstrating strong capital
discipline while ensuring that it is able to continue to finance its strong and
growing organic growth pipeline.
`BHP Billiton has consistently stated its cash flow priorities: first to invest
in value enhancing growth projects; next to maintain a robust capital structure
in line with an A credit rating; and finally to return cash to shareholders.
This final step includes our progressive dividend policy and other methods, such
as today`s buy-back announcement.`
BHP Billiton has committed to proceed with the off-market buy-back only at a
price which represents at least a 5% discount to the volume weighted average
price of BHP Billiton Limited shares over the 5 trading days up to and including
the closing date of the buy-back (`Market Price`). Eligible shareholders may
choose to participate in the off-market buy-back for various reasons and in so
doing may take account of the tax credits that only arise under the Australian
taxation regime.
Given the off-market buy-back will proceed only at a discount to Market Price,
BHP Billiton does not anticipate that shareholders who are resident outside
Australia will participate as they are likely to obtain a better outcome by
selling their shares on-market. Shareholders in the US and Canada and ADR
holders will not be eligible to participate in the buy-back when it proceeds.
Mr Argus said, `All shareholders in BHP Billiton Limited and BHP Billiton Plc,
including those not participating in the buy-back process, regardless of
location and tax status, benefit from an off-market buy-back. We believe this
is an efficient way of returning capital, as the purchase of shares at a
discount to the Market Price allows us to buy back a greater number of shares
than is possible in an on-market buy-back for the same total cost. The value of
the remaining shares will therefore be enhanced through the increased earnings,
cash flow and return on equity attributable to each share.
`Having regard to all of the options, we believe that this will be the most
value enhancing way of returning capital given the diverse nature of our
shareholder register and, combined with our ongoing progressive dividend policy,
will provide the optimal strategy for maximising economic value across our
entire shareholder base.`
The capital management programme will be funded from existing resources. Given
the strength of BHP Billiton`s financial position, it will remain strongly
capitalised after completion of the programme, and the capital return will not
compromise the company`s `A` credit rating or ability to fund its strong
pipeline of organic growth projects.
The Board of BHP Billiton has concluded that the proposed off-market buy-back
can be completed without negatively affecting the ability of BHP Billiton
Limited to pay fully franked dividends for the foreseeable future.
Eligible shareholders will be sent the buy-back booklet containing the terms and
conditions of the off-market buy-back on or around 20 October 2004. The booklet
cannot be sent into the United States or Canada.
Off-market buy-back details
Under the off-market buy-back process, all eligible shareholders will be able to
tender any number of their BHP Billiton Limited shares at discounts of between
5% and 14% to the Market Price, or as a Final Price Tender. The final buy-back
price will be determined according to the tenders lodged by eligible
shareholders and the Market Price.
For Australian tax purposes, the buy-back price received by participating
shareholders will comprise the following:
(a) a capital component of A$2.10 per share (as agreed with the Australian
Taxation Office (`ATO`)); and
(b) a fully franked dividend equal to the buy-back price less A$2.10.
For the purpose of Capital Gains Tax calculations, the capital proceeds will be
the A$2.10 capital component plus an amount equal to the excess of the Tax
Value(1)over the buy-back price.
Under the off-market process, BHP Billiton Limited will buy all shares tendered
by eligible shareholders who elect to receive the final buy-back price or who
tender their shares at a discount greater than or equal to the final discount
determined under the tender process, subject to any required scale back. The
operation of the scale back has been structured to ensure that retail
shareholders are not disadvantaged. All shares that are accepted by BHP
Billiton will be bought back at the final buy-back price, even if they are
tendered at a discount that represents a price below the final buy-back price.
BHP Billiton Limited will not buy back any shares tendered by shareholders at a
price above the final buy-back price. Although the target buy-back size is
between A$1.0 and A$1.5 billion (approximately US$0.7 to US$1.1 billion), the
company may vary the size of the buy-back in light of demand.
(1) Tax Value will be calculated pursuant to the ATO guidelines (detailed in Tax
Determination TD 2004/22) which effectively provide that the Tax Value will be
A$14.35, adjusted by the movement in the S&P/ASX 200 Index from the opening on 5
October 2004 to the close of the buy-back.
Off-Market Buy-Back Timetable
The timetable for the off-market buy-back is outlined below.
Event Date
Buy-back announcement 5 October 2004
Cut-off date for franking entitlement under 45-day 7 October 2004
rule(2)
Shares quoted ex-entitlement to participate in the buy- 11 October 2004
back (Shares acquired on the ASX on or after this date
will not receive an entitlement to participate in the
buy-back)
Determination of shareholders entitled to participate 15 October 2004
in the buy-back (Record date)
Buy-back tender period opens 1 November 2004
Buy-back tender period closes - tenders must be 19 November 2004
received by midnight (AEST)
Announcement of the buy-back price and any scale back No later than 23
November 2004
Buy-back proceeds dispatched to participating No later than 30
shareholders completed November 2004
Shareholders who have any enquiries in relation to the off-market buy-back may
contact BHP Billiton`s buy-back enquiry line on 1300 726379 toll free within
Australia or +613 9415 4208 if calling from outside Australia, or visit our
website www.bhpbilliton.com. Shareholders should seek their own professional
advice (including tax advice) about the implications of participating in the buy
back in their own individual circumstances.
Contacts:
Australia United Kingdom
Jane Belcher, Investor Relations Mark Lidiard, Investor & Media
Tel: +61 3 9609 3952 Relations
Mobile: +61 417 031 653 Tel: +44 20 7802 4156
email: Jane.H.Belcher@bhpbilliton.com Mobile: +44 7769 934942
email:
Mark.Lidiard@bhpbilliton.com
Tania Price, Media Relations Ariane Gentil, Media Relations
Tel: +61 3 9609 3815 Tel: +44 20 7802 4177
Mobile: +61 419 152 780 Mobile: +44 7881 518715
email: Tania.Price@bhpbilliton.com email:
Ariane.Gentil@bhpbilliton.com
United States South Africa
Francis McAllister, Investor Relations Michael Campbell, Investor & Media
Tel: +1 713 961 8625 Relations
Mobile: +1 713 480 3699 Tel: +27 11 376 3360
email: Mobile: +27 82 458 2587
Francis.R.McAllister@bhpbilliton.com email:
Michael.J.Campbell@bhpbilliton.com
Important notice:
Not for distribution or release in or into the United States or Canada.
This press release does not constitute, or form part of, any offer or invitation
to sell, or any solicitation of any offer to purchase any securities in any
jurisdiction, nor shall it or the fact of its distribution be relied on in
connection with any contract therefor. No indications of interest in the buy-
back are sought by this press release, which relates to the BHP Billiton capital
management programme. Shareholders in the United States or Canada or who are,
or who are acting for the account or benefit of, a US person (within the meaning
of Regulation S under the Securities Act) or a resident of Canada and ADR
holders will not be eligible to participate in the off-market buy-back described
in this press release. Buy-back documents, including the booklet describing the
terms of the buy-back and tender forms, when issued, will not to be distributed
or sent into the United States or Canada.
(2) Shares acquired after this date will generally not satisfy the 45-day rule
for the purposes of calculating an Australian taxpayer`s income tax credits.
Background
An off-market buy-back tender is a commonly adopted capital management mechanism
employed by Australian companies. In essence, it allows a company to buy back
its shares from shareholders at a price which is less than the prevailing price
on the open market/stock exchange. In recent comparable Australian off-market
buy-backs for example, the final buy-back price has been set at a discount
within a range of approximately 8% to 17% to the market price at close of the
buy-back. Australian companies have the opportunity to buy back shares at a
discount to market price because, among other things, the buy-back proceeds are
treated in a manner that has Australian tax outcomes which are valued by some
Australian resident shareholders.
Under Australian taxation law, a portion of the buy-back price will be deemed to
be a dividend for Australian tax purposes. The dividend portion of the buy-back
price will be `fully franked`, which means that Australian tax residents will be
entitled to an income tax credit representing the Australian corporate income
tax that BHP Billiton has paid in respect of the profits from which the dividend
is derived. In the case of some Australian shareholders, depending on the
shareholder`s marginal tax rate, this credit may be larger than the amount of
tax which will be assessed on the dividend.
To qualify for the tax credits, shareholders must generally have held their
shares `at risk` for a minimum of 45 days prior to the date on which the Company
determines the buy-back price and buy-back allocations. Under the BHP Billiton
off-market buy-back timetable, the 45-day rule cut off date is 7 October 2004,
as shares acquired after 7 October will not, under the timetable, be held at
risk for 45 clear days.
The ex-date for buy-back entitlements on the ASX is 11 October 2004. Shares
acquired on or after this date will not confer an entitlement to participate in
the off-market buy-back. BHP Billiton has received advice from the ATO that
shares purchased on or after the buy-back ex-date (11 October 2004) will not be
allocated on a Last In First Out (LIFO) basis for the purposes of the 45-day
rule. Accordingly, if shareholders purchase shares on or after the buy-back ex-
date this should not, of itself, result in them failing the 45-day rule in
respect of other shares sold into the buy-back.
In addition to the dividend portion, the remaining amount will be treated as
`capital proceeds` which may result in some Australian residents realising a
capital loss which can be used to offset that holder`s other capital gains. An
off-market buy-back however will have different tax consequences for each
shareholder depending on their residency for tax purposes, the price at which
they originally purchased their shares and their individual tax position.
Shareholders should seek advice as to the taxation consequences of participating
in the buy-back in their own circumstances.
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5 October 2004 |
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