On 2 December 2021, BHP announced a final board decision to unify BHP’s corporate structure under its existing Australian parent company, BHP Group Limited. The unification will require the approval of shareholders of both the Australian and UK businesses at meetings that will take place on 20 January 2022.
Today, BHP has published a shareholder circular, a prospectus and a pre-listing announcement for the Johannesburg Stock Exchange.
If all the conditions are satisfied, unification is expected to occur on 31 January 2022.
What are the advantages of the unification?
BHP’s leadership believes that now is an attractive time to unify BHP’s corporate structure as it continues to position its resource portfolio to grow value from commodities that will benefit from global trends like decarbonisation and economic growth.
Having the entire company running through one business will reportedly make BHP simpler and more agile, with the strategic flexibility to shape the portfolio for the future.
One example that BHP gave is that it would enable BHP to undertake certain transactions more simply and efficiently than it can under the current dual listed company structure. That includes the agreement to merge the petroleum business with Woodside Petroleum Limited (ASX: WPL). Future demergers and equity raising transactions would also be simpler to execute.
The business will have the same commitment to “great returns” for shareholders with the same dividend policy for shareholder returns as well as the same ability to distribute fully franked dividends.
How much is this going to cost?
BHP has outlined that the total transaction costs relating to unification are currently estimated to be between US$350 million to $US$450 million (pre-tax) and includes stamp duty, adviser and other fees.
What commodities are BHP focused on?
BHP says that it’s focused on the resources that the world needs to grow and decarbonise.
Its current portfolio includes copper for renewable energy, nickel for electric vehicles, potash for sustainable farming, as well as iron ore and metallurgical coal for the steel needed for global infrastructure and the energy transition.
The latest move by BHP is to invest US$5.7 billion in capital expenditure for the Jansen Stage 1 potash project in the province of Saskatchewan, Canada.
Is the BHP share price good value?
Analysts at Macquarie Group Ltd (ASX: MQG) think that it is, with a buy/outperform rating and a price target of $51. That’s more than 25% than where BHP shares are right now.
Based on dividend estimates, Macquarie reckons that BHP will have a grossed-up dividend yield of 14.4% in FY22 and 10% in FY23.