Attention investors: Today is your last chance to buy BHP Billiton Limited (ASX: BHP) shares for rights to a stake in its promising spin-off entity, South32.
When the Australian sharemarket opens on Monday morning, BHP Billiton could be as much as US$15 billion lighter as it completes the spin-off in what will be one of the largest corporate breakups in the history of mining. For every BHP Billiton share an investor owns as of the market's open, they will be entitled to one share in the new South32.
Admittedly, some analysts have struggled to ascribe a valuation on the new company given the wild fluctuations of the Australian dollar, political risks in South Africa and volatile commodity prices, among other factors. Indeed, some would also argue that a premium should be assigned to the stock given that it could well become a takeover target for another large miner, including Glencore Xstrata.
But many also believe it could well go on to outperform its parent entity as well as the market as a whole. Indeed, history is certainly on its side with other spun-off entities such as Orora Ltd (ASX: ORA) and Recall Holdings Ltd (ASX: REC) having delivered market-smashing returns since they first separated from Amcor Limited (ASX: AMC) and Brambles Limited (ASX: BXB), respectively.
Perhaps the biggest advantage of gaining exposure to South32 is that, for a long time, South32's assets have been neglected by BHP Billiton in favour of the miner's core commodities, being iron ore, coal, copper, petroleum and, to a lesser extent, potash.
While some investors no doubt consider South32 as being made up of BHP's unwanted basket of assets, others will recognise that this is a fantastic opportunity for a new management team to focus on improving their operating efficiencies, reducing costs and thus increasing their overall profitability.
Given that 98% of shareholders voted in favour of the demerger recently, it is clear that the market believes South32 could create significant shareholder value. In my opinion, investors should certainly consider picking up a stake in the business.
