BHP recommends demerger to shareholders, promises not to cut dividend
BHP Billiton, the world's largest miner, has recommended shareholders to approve its proposed demerger as it spins off its non-core activities into a new company called South32.
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The group said in a statement that it "believes that with a more focused portfolio, BHP Billiton will be better placed to achieve further productivity benefits in its core portfolio, while creating a substantial new company, South32".
It will cost the company a one-off bill of $738m to go through with the demerger.
"Having assessed a number of alternatives, the BHP Billiton board considers the demerger to be the preferred approach to achieving simplification of our portfolio and maximising shareholder value," said chairman Jac Nasser.
"The board unanimously recommends that shareholders vote in favour of the demerger," he said.
BHP has also promised to maintain a progressive dividend policy and doesn't plant to rebase its payout to shareholders following the demerger, which implies a higher payout ratio.
What's more, South32 will distribute at least 40% of underlying earnings back to shareholders every six months.
Shareholders, which will receive one South32 share for every BHP share they own, will vote on the transaction on 6 May.
BHP, which currently has 41 assets across 13 countries, plans to slim down its portfolio to just 19 key assets across eight countries, as it focuses on certain long-life petroleum, copper, iron ore, coal and potash projects, which collectively generated 96% of underlying operating profits in 2014.
South32, which will be headquartered in Perth, Australia, will be made up of the non-core alumina, aluminium, coal, nickel, manganese, silver, lead and zinc assets.