Global miner BHP Billiton plc (LON:BLT) saw its shares top the FTSE 100 leader board in late morning trading after activist hedge fund manager, Elliott Advisors reportedly urged the firm to consider some radical moves to unlock shareholder value.
In a letter sent to BHP Billiton directors, according to media sources, Elliott has said the firm should scrap its dual-corporate, Anglo-Australian structure, demerge its oil business and rejig its capital return policy.
Elliot, in a statement, said: "The goal is to provide details of the BHP shareholder value unlock plan to all of BHP's shareholders so that BHP can engage openly with all parties on the plan to unlock shareholder value.”
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It claimed that the reforms it proposed would create 48% more value for Australian shareholders and 51% more value for London shareholders.
The hedge fund owns around a 4.1% stake in BHP Billiton, and also holds rights with its affiliates to acquire up to 0.4% of the miner’s shares.
In late morning trading, BHP Billiton shares were up 4.5%, or 58.5p at 1,346.0p.
Dynamics coming together …
Commenting on the move, Helal Miah, investment research analyst at The Share Centre: “The mining sector has been going through a tough few years as the overall global economy remains relatively weak.”
He added: “This forced mining groups to aggressively cut back on large scale investment programmes, sell assets, drastically cut costs and focus on balance sheet repair. This naturally left the likes of BHP Billiton as far more streamline operations.
“On top of this, we have seen a modest recovery in a broad range of commodities since the lows at the start of 2016. With all these dynamics coming together, interested investors may want to note that BHP has reported encouraging numbers in recent trading updates.”
READ: BHP Billiton boosts dividend as half-results see big improvement …
The analysts concluded: “The ongoing restructuring is taking BHP Billiton back in the right direction and we believe that the worst may be over for the commodities sector.
“We are therefore continuing with our ‘Buy’ recommendation on the stock for investors seeking a balanced return and willing to accept a medium to high level of risk.”