By Rhiannon Hoyle 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (February 21, 2018).

SYDNEY -- BHP Billiton Ltd., its net profit off 37%, signaled it may be willing to yield to an activist investor's latest assault on its corporate structure, even as it lifted its dividend 38%.

The world's top miner by market value attributed the fall in half-year profit, to US$2.02 billion, to one-time charges from a U.S. tax overhaul that has hit international companies. Stripping out those charges, profit was up 25% to $4.05 billion.

BHP on Tuesday offered a clearer timetable for offloading its U.S. shale business -- a disposal announced last August and notched up as a victory by New York hedge fund Elliott Management Corp., which had questioned its fit with BHP's petroleum division and main units that mine iron ore, copper and coal.

Elliott, battling BHP for a year, earlier this month launched a fresh attack on its Sydney-London dual listing. Though BHP on Tuesday defended the structure, Chief Executive Andrew Mackenzie said he will discuss it over the next few weeks with investors -- including Elliott, scheduled to meet with him later this week. After that, he told reporters, "I may have more to say."

"I acknowledge there are some ways in which you can do the numbers where the upside prize looks quite large," Mr. Mackenzie said -- but other scenarios "suggest this is a very risky venture indeed."

A Feb. 5 report commissioned by Elliott and compiled by FTI Consulting claimed shareholders would gain more than US$22 billion if BHP gave up what Elliott calls its "obsolete and value-destroying" structure and became a single Australia-incorporated company. BHP said it currently views the costs and risks as outweighing the potential benefits.

Elliott, founded by Paul Singer, owns roughly 5% of BHP's London stock, and is known for its power to disrupt company boardrooms.

On Tuesday, BHP said it is opening data rooms for potential buyers of the shale business, which includes more than 838,000 acres in shale-rich U.S. regions. The company said it expects initial bids between March and June. It could announce deals before the end of the calendar year.

"Over a 12-month time frame, we'd like to see them sell that onshore business and return cash to shareholders through an uplift in the dividend and an off-market buyback in Australia," said Craig Evans, who co-manages a natural-resources fund for Tribeca Investment Partners. Tribeca oversees roughly 2.5 billion Australian dollars (US$2 billion) in assets, including BHP shares.

Several analysts project the miner could use cash from a sale, whose price should benefit from recovering oil prices, to further boost investor returns.

"We have had a lot of interest from many parties" and "are very much marketing into what is a firming oil market," said Mr. Mackenzie.

A sharp rise in commodity prices is driving up miners' earnings, allowing them to boost dividends, cut debt and spend on new projects and deals -- a contrast with two years ago, when a commodities slump had many slashing costs and jettisoning assets as losses piled up.

World commodity markets are being lifted by rare synchronized economic growth in major economies, including China, the U.S. and Europe.

Directors of BHP declared a dividend of 55 cents a share, up from 40 cents a year ago, meaning it returned nearly three-quarters of its earnings to shareholders. Net debt is down US$900 million since mid-2017, at US$15.4 billion.

BHP didn't follow other miners -- including Anglo-Australian rival Rio Tinto PLC -- by announcing a share buyback, as some analysts had predicted, although it said it will set up a dividend-reinvestment plan that will allow shareholders to use their payouts to buy more shares.

"We have a lot of interest in having one from our retail shareholders," said Mr. Mackenzie, adding, "obviously within reason, their wish is our command."

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

 

(END) Dow Jones Newswires

February 21, 2018 02:47 ET (07:47 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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