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WIKI ANALYSIS
BHP Billiton Limited (BHP) is the world's largest diversified resource company, with operations spanning several continents. It has interests in mineral exploration, production and processing, oil and gas exploration and development, steel production and merchandising. The company is a major producer of a range of commodities, most notably aluminum, base metals (copper), carbon steel materials (iron ore and coking coal), energy coal, petroleum, stainless steel materials (nickel and chrome) and diamonds. The company was formed through the 2001 merger of BHP, an Australian company, and Billiton, which was operated from London with the then majority of operations in South Africa. The merger was structured as a dual-listed companies (or DLC) merger. As a result, the two companies still technically exist as separate entities BHP Billiton Limited (formerly BHP) and BHP Billiton Plc (formerly Billiton) but share one board and one management team, which are headquartered in Melbourne, Australia. The pre-existing primary listings on the London and Australian stock exchanges are maintained, as are the secondary listings of BHP Billiton Plc on the Johannesburg and Paris stock exchanges.
Business and Financials
On June 25, 2003, BHP Billiton Plc listed its sponsored American Depository Receipts security on the New York Stock Exchange and, as a result, BHP Billiton now maintains an American Depository Receipt listing of both BHP Billiton, Limited and BHP Billiton Plc on the New York Stock Exchange. On March 8, 2005 BHP announced a cash offer for the entire issued capital of nickel and uranium mining producer WMC Resources, Ltd. BHP Billiton's AUD$7.85 per share cash bid, valuing WMC at AUD$9.2B (US$7.3B).
On February 7, 2007, management announced that the company would increase its capital management program by an additional $10B bringing the total allocation to $11.3B. The company earmarked $2.5B for an Australian off-market buy-back in 1Q07, with the remaining $8.8B being allocated to an on- market UK buy-back over the next 18 months. Since August 2006 $1.7B has been returned to shareholders through on-market purchases of 92,285,000 BHP shares.
BHP Billiton Ltd. (ADR: BHP), reported record annual profit on August 18th, 2008 and said it expects demand for commodities to remain strong. Net profit for the year ended June 30 climbed 14.7% to $15.39 billion, from $13.42 billion in the previous year. Earnings before interest and tax, was $24.28 billion, up 21%.
Trends and Forces
Possible Merger with Rio Tinto
On November 12, 2007, BHP released details of a merger proposal with Rio Tinto, which comprised a 3-for-1 share indicative offer, or 28% premium to Rio Tinto shareholders based on the combined volume weighted average market capitalizations of Rio Tinto Limited and Rio Tinto plc over the month ended 31 October 2007 and the volume weighted average BHP Billiton share prices over the same period. According to management, the combined entity could eventually deliver annual savings of $3.7B largely through the removal of duplication as well as procurement and operating efficiency savings, with benefits of $1.7B by the third year, and additional cost savings of $2B after seven years. The merged company would have more than $70B in annual sales and become the world's largest producer of copper and aluminum, and the second-largest provider of iron ore. In addition, BHP management also announced it intended to commence a $30B share buy-back post completion of the merger.
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