The countdown is on for the demerger of BHP Billiton Limited's (ASX: BHP) alumina, aluminium, coal, manganese, nickel, silver, lead and zinc assets into a newly listed entity to be known as South32.
Here are ten facts BHP shareholders need to know:
- The rationale for the demerger is to unlock shareholder value.
- While the spin-off will reduce the size of BHP it will remain one of the largest diversified global resource companies with large long-life petroleum, copper, iron ore, coal and potash assets.
- The slimmed down BHP will be a more simplified company including operations in 8 countries rather than the current 13; 19 assets rather than the current 41; and 12 operated assets rather than the current 20.
- South32 will become the world's largest producer of manganese ore and operate the world's largest producing silver mine.
- On a pro-forma basis for financial year 2014, South32 had revenue of US$8.3 billion and underlying earnings of US$446 million.
- The expected level of net debt in the new South32 company is US$674 million.
- New shares in South32 will be allocated to BHP shareholders on a one-for-one basis.
- A shareholder vote on the demerger proposal is to be held on 6 May.
- Assuming a vote in favour of the proposal, BHP's shares will trade ex-entitlement to South32 from 15 May.
- South32's shares are scheduled to begin trading on the ASX on 2 June.
On balance, historically a spin-off company often performs well post demerger. For this reason shareholders may be best off holding on to their South32 shares for a period of time, even if they ultimately decide to sell.
Investors in both BHP and Rio Tinto Limited (ASX: RIO) will be feeling more comfortable given the diversified nature of assets housed within these giants, compared with the shareholders of Fortescue Metals Group Limited (ASX: FMG). They may also benefit from a market re-rating South32, thanks to its slimmed down, more focussed asset base.
