BHP gives billions back to shareholders – The Wall Street Journal

EDINBURGH — BHP has announced plans to buy back shares. This is part of a trend of major mining groups repurchasing stock, which Glencore boss Ivan Glasenberg has reportedly said is the best investment for mining companies. The sector is trading at a discount to the wider market, with concerns about slowing global growth and the US-China trade war keeping a lid on enthusiasm for mining stocks. BHP is funding its plan with the proceeds of the sale of onshore US oil and gas fields to BP and Merit Energy Company in July for a total of $10.8bn, a move that the Financial Times described as BHP drawing a line under a disastrous foray into the shale industry that sullied the company's reputation as a responsible steward of capital. "Big miners are under pressure from shareholders to boost investor returns, having blown billions of dollars on ambitious projects and dealmaking during the decade-long commodities boom that ended in 2014 with a brutal downturn in prices. Other companies including Glencore, Vale and Rio Tinto have cranked up dividend payments and are also repurchasing shares," says the FT. – Jackie Cameron.BHP to Return $10.4 Billion to Shareholders.By Rhiannon Hoyle.___STEADY_PAYWALL___.The Wall Street Journal – BHP Billiton Ltd. said it would hand $10.4 billion to shareholders via a stock buyback and special dividend, as the miner continues to face a campaign against its strategy and structure by activist investor Elliott Management Corp.The capital return was outlined by BHP, the world's biggest mining company by market value, within hours of completing the sale of most of its U.S. onshore shale division to BP PLC. The sale of the oil and gas fields was among the demands of Elliott, a U.S. hedge fund founded by Paul Singer, and ends a costly saga that left the company roughly $20 billion worse off..BHP's Australia-listed shares surged on news of the buyback and dividend, rising around 5% after touching a near six-month low in late October as the mining sector felt the heat from the global equities selloff. Analysts said the stock gains reflected an earlier payout to shareholders than many in the market had expected.Like many of its competitors in the global resources industry, BHP had used cash generated during earlier booms in commodity prices to buy assets or invest in expanding its mining operations from Australia to North America. It paid a combined $20 billion to acquire U.S. shale assets in 2011, and then spent billions more to explore and develop them.But a collapse in energy prices resulted in massive impairment charges, including a more than $7 billion pretax charge in 2016 that is its largest-ever single write-down. Miners including BHP and Rio Tinto PLC have adopted a conservative strategy since then, even as commodity prices recover.Frictions between BHP's management and Elliott look likely to continue as several other key demands by the activist investor remain unmet. Elliott, which disclosed a sizable stake in the company in April 2017 and immediately sought sweeping changes, wants BHP to collapse a structure that sees its shares trade in London and Sydney in favor of a single Australia-incorporated company.Elliott says its plan would create some $22 billion in value for shareholders. BHP disagrees with that assessment, and has so far rejected the move as too costly without bringing enough benefit."I acknowledge there are some ways in which you can do the numbers where the upside prize looks quite large," but other scenarios suggest it would be a very risky move, Chief Executive Andrew Mackenzie said earlier this year.Elliott, which controls about 5% of BHP's London stock, declined to comment on the capital-return plan, which will include a $5.2 billion buyback of Australian stock only.Under Australian tax laws, BHP can purchase shares off-market at a discount of up to 14%, which increases its appeal when London shares are trading at a discount of lesser value. London listed shares were on Wednesday worth about 12% less than Australia-listed ones."We believe that the off-market buyback and special dividend program announced today will return significant value to all our shareholders, allowing the entire BHP global shareholder base to participate, both directly and indirectly, in the shareholder return program," BHP Chairman Ken MacKenzie said.The buyback will start immediately and be completed before the end of the year. BHP said it would also pay a special dividend to shareholders totaling $5.2 billion, adding that it would bring the total cash handed back to shareholders over the past two years to $21 billion.Still, some investors question whether mining companies are retaining enough cash for future growth, for fear they may be too late to take advantage of the next big upswing in prices. The world's top diversified miners are now spending less than half what they spent on projects six years ago.BHP said it retains enough cash to keep investing, with $8 billion set aside for projects annually. In recent months the company bought a roughly 11% stake in copper explorer SolGold PLC, which is developing the Cascabel copper and gold project in Ecuador.Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com.

BHP gives billions back to shareholders – The Wall Street Journal

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