LONDON (Reuters) - UK shareholders in BHP Billiton (L:BLT) (AX:BHP) might sell $935 million (629 million pounds) worth of shares in South32, a company which BHP is planning to hive off, if the new mid-sized mining firm is not eligible for inclusion in benchmark indices, Macquarie warned.
Investors in BHP, the world's largest mining company, will vote on May 6 on a proposed split of its core iron ore, petroleum, copper and coal businesses from assets which will form South32 ahead of a planned listing in May.
BHP Billiton is listed in Australia and London while South32, which includes mostly assets in Australia and South Africa, would have a primary listing in Australia, with a secondary listing in South Africa and a standard listing in London.
The potential for inclusion in the London Stock Exchange's (LSE) FTSE indices comes with premium, rather than standard, listings.
"We believe a standard listing on the London Stock Exchange may render South32 ineligible for inclusion in the FTSE 100 and Stoxx 50 indices, and in MSCI and FTSE indices as a standalone UK component," said Trista Rose at Macquarie Securities Group, based on an analysis of BHP's shareholder register.
"This makes it likely that active UK funds, especially those that are FTSE benchmarked, may need to sell their allocation in South32... Net selling in South32 on the LSE may reach approximately 355 million shares, or $935 million, as a result of this index exclusion."
Some of the global funds benchmarked against an index might sell South32 shares in the UK and buy them on the Australian Stock Exchange, Rose added.
BHP Billiton has a market capitalisation of about $120 billion while South32 assets have a book value of about $12 billion.
South32 shares are expected to list on May 18 subject to shareholders approval.