Although BHP Billiton's (ASX: BHP) dual-listing structure causes headaches for Australian-listed fund managers and investors, it is likely that the mining giant will retain its current corporate listing structure due to the flexibility that it provides.
Investors are paying a much higher premium for Australian-listed stocks compared to the miner's London Stock Exchange listed shares. The franking credits available to Australian investors are one of the more prominent reasons behind the spread, which sat at around 11% on Wednesday (although it has widened out to a difference of over 20% in the past).
There have been rumours of late that BHP could look to unwind this current structure. This would mean de-listing from the London Stock Exchange. These rumours were further sparked with BHP reportedly moving key London-based members of management to its official headquarters in Melbourne.
However, while such a move would create tax complexities and associated costs, the management team looks much more likely to continue focusing on cutting costs and improving productivity. The Australian Financial Review quoted UBS analyst Glyn Lawcock as saying: "The dual-listing structure does provide flexibility and access to different capital markets. It doesn't impact the day-to-day operation of the business so I don't think it is front of mind of management at the moment."
BHP's rival Rio Tinto (ASX: RIO) also maintains a presence on both stock exchanges, although its official headquarters are in London. Like BHP, Rio's Australian stocks are also trading at a 10% premium compared to its London shares.
BHP's shares are currently trading at $36.96 after starting 2014 trading at $37.99.
Foolish takeaway
At today's price, BHP presents as an opportunity for investors who want exposure to the mining sector. While it is more diversified than others in the industry, including Rio Tinto, Fortescue Metals Group (ASX: FMG) or Arrium (ASX: ARI), it is a safer investment and could deliver strong gains in the years to come – particularly with its 3.2% dividend yield.
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