What: Shares of BHP Billiton Limited (ASX: BHP) were drifting aimlessly this afternoon, until a market sensitive announcement was made that propelled the shares suddenly higher. At the time of writing the shares are up 99 cents or 2.60%, while the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) is only up 0.5%.
Why the positive price reaction?
The company announced a demerger of a selection of assets, after studying various structural alternatives at board level. Effectively, BHP is simplifying its portfolio of assets and intends to have four main pillars including:
Iron ore
Copper
Coal
Petroleum Assets
The company has potash in mind as a potential fifth pillar.
Why the simplification?
It is a continuation of a trend over the last decade and aims to make the company more productive while also:
1. Retaining the benefits of diversification.
2. Generating stronger growth in cash flow.
3. Aiming for a superior return on investment.
