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Hedge fund Elliott raises stake in BHP in push for change

Published 16/08/2017, 08:47
© Reuters. FILE PHOTO -Australian mining company BHP's new corporate logo
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MELBOURNE (Reuters) - Hedge fund Elliott Management has raised its stake in BHP Billiton (AX:BHP) (L:BLT) to 5 percent, bolstering its position to agitate for change at the top global miner, but signalled its support for the incoming chairman.

New York-based Elliott launched its effort in April, at which point it held a 4.1 percent "economic interest" in BHP's UK-listed shares, calling for the company to quit all or part of its petroleum business, boost returns and ditch its dual listing.

BHP has rejected Elliott's proposals as flawed or too costly, but Elliott said it was seeing signs of change.

"BHP appears to have already taken steps toward a smarter, more value-generative way of conducting business, and we support and encourage continued progress," Elliott said in a statement on Wednesday.

The activist investor said it now holds 5 percent of BHP's UK-listed shares, and also holds a small economic interest in BHP's Australian shares.

In the UK, any shareholder holding more than 5 percent can call an extraordinary general meeting and require the circulation of a resolution.

The fund has not decided whether to seek a board seat at the annual meeting in October, a person close to Elliott said. However Elliott's comments on Wednesday suggested it may wait to see what changes MacKenzie brings to the company.

"Recent statements by the company give us confidence that Chairman-elect Ken MacKenzie will heed shareholders' calls to take constructive steps to enhance value for BHP and its owners," it said.

Those steps include exiting the U.S. shale business "and an in-depth, open and truly independent review of the petroleum business' place in BHP's portfolio."

"We and other shareholders look forward to hearing more from management on this subject, following the growing analyst and shareholder consensus that BHP should exit U.S. shale," Elliott said.

BHP declined to comment on Elliott's statement.

MacKenzie has been sounding out shareholders worldwide ahead of taking up his position as chairman on Sept. 1.

Australian investors said Elliott's increased stake reflected increased confidence in the company's direction.

"They are showing conviction in the prospects of the business," said investment manager Rohan Walsh of Melbourne-based Karara Capital, which owns shares in BHP.

However, it was too early to point to any change of strategy yet by BHP, said others.

"They've put a bit of a blowtorch to BHP - but I don't think you can say anything that they've done has been successful as such," said Andy Forster, senior investment officer at Argo Investments, a top 20 shareholder in BHP's Australian shares.

BHP has acknowledged that it paid far too much when it entered the shale business and in the long run will look to get out of it when the time is right.

"They're not going to give it away," Forster said.

Elliott said last month it also had deep concerns over a BHP proposal to enter the currently over-supplied fertiliser market, reiterating its call for change at the mining giant.

© Reuters. FILE PHOTO -Australian mining company BHP's new corporate logo

BHP will report its full year financial results next week.

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