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Unified BHP trades on JSE in move expected to unlock demerger and equity raising potential

THE consolidation of the two companies will provide a simpler corporate structure and also eliminate the share price differential that previously existed between BHP Plc and BHP Limited. | Supplied

THE consolidation of the two companies will provide a simpler corporate structure and also eliminate the share price differential that previously existed between BHP Plc and BHP Limited. | Supplied

Published Feb 2, 2022

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TRADE in shares in the unified BHP Group Limited kick-started on the JSE yesterday after a UK court nod for the amalgamation of shares in the company’s two formerly separated entities, with the new structure expected to unlock demerger and equity raising potential.

The shares started the day at R515, but by 3.24pm were 3.85 percent lower at R495.17.

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BHP has just announced UK court approvals, given on January 25, for its scheme of arrangement, which brought together BHP Group Plc and BHP Group Limited under one entity now known and listed as BHP Group Limited.

This arrangement has ended the global mining giant’s previous dual public holding structure, with the new unified entity having primary listing on the Australian Stock Exchange, a secondary listing on the JSE, a standard listing on the London Stock Exchange and a further depositary share listing on the New York Stock Exchange.

“Unification will enable the BHP Group to undertake certain transactions such as demergers and equity raisings more simply and efficiently as a result of the BHP Group having a single shareholder base,” BHP said. “This will improve the BHP Group’s flexibility to shape its portfolio, with the objective of maximising long-term value for shareholders.”

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In addition to this, the consolidation of the two companies will provide a simpler corporate structure and also eliminate the share price differential that previously existed between BHP Plc and BHP Limited. Under the previous dual structure, shares in London traded at a lower price than in Sydney, Australia.

Paul Miller, a mining finance expert, however, said yesterday that the new unification scheme meant that BHP Group Limited would be a "foreign company for index” purposes. “This means at the next index review it will be down weighted to whatever the local share register is as a proportion of the total expanded register.”

But according to Valdene Reddy, a director of capital markets at the JSE, the company’s retention of its listing on the JSE under the merged entity, signals confidence in the quality of large companies and showcases the company’s commitment to giving South African investors access to a large mining company operating across the globe.

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“This signifies the importance of the JSE’s deep market with highly liquid shares that give investors global exposure,” said Reddy.

After the consolidation, appointment letters for non-executive directors will be amended to reflect that each will only be serving under BHP Group Limited with effect from February 1, 2022.

Further amendments are also being factored in to the contract of employment for Mike Henry, the chief executive for BHP.

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“Henry’s contract will be amended, with effect from February 1, 2022, to reflect that (he) will only be serving as the chief executive of BHP Group Limited (and not of BHP Group Plc). BHP is also taking this opportunity to make a number of further amendments to Henry’s contract for general improvement purposes. The key amendments are new provisions relating to Covid-19 matters,” said the company.

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