BHP Billiton Plc’ share price down, to spin off $15bn of assets

BHP Billiton Plc shares dropped as the company announced a plan to divest a large portion of its assets, including silver, aluminum, manganese and coal plants and mines, as the company drives towards a simpler and more manageable portfolio.

“For over a century, BHP Billiton has progressively reshaped its business to maintain its industry leadership,” Jac Nasser, Chairman of BHP Billiton, said in the statement. “We believe the proposed demerger, if implemented, will accelerate the simplification of the group’s portfolio, provide investors with choice and unlock value in both companies.”

The new company is to be listed in Australia, with a secondary listing in South Africa. The current Chief Financial Officer of BHP Billiton, Graham Kerr, will be appointed as a Chief Executive Officer of the new entity.

In addition to most aluminum and manganese assets, the new entity is to also house individual mining assets that include the companys Cerro Matoso nickel mine located in Colombia and the Cannington silver, lead and zinc pit located in Australia. BHPs South African thermal coal business and the coking coal operations located in the Illawarra will also be included in the newly-formed company.

The split will allow BHP to focus efforts and management resources towards improving performance of its core businesses, including iron, copper, coal and petroleum.

The spin off, which is yet to be named, is estimated to be worth about $15bn, and the demerger could be the largest since Morgan Stanleys 2008 $15.8bn divestment of Discover Financial Services, according to Bloomberg.

“In a single step, we will significantly increase BHP Billiton’s focus on the exceptionally large resource basins that underpin its competitive advantage,” CEO Andrew Mackenzie said. The assets that would form the new company “will be more valuable in a purpose-built, independent company than they would be in BHP Billiton”.

BHP Billiton Plc lost 4.11% to trade at 1 982 pence per share by 10:37 GMT, marking a one year change of +1.10% and valuing the company at £113.59bn (~$189.13).