BHP boss to meet Elliott activists after revised attack

BHP Billiton boss Andrew Mackenzie has agreed to meet his tormentors at Elliott Advisers after the US activist investor ramped up its criticism of the mining giant's "do-nothing approach”, which some analysts felt was not totally justified.

Mackenzie will meet Elliott representatives on Wednesday, according to several media reports from a mining and metals conference in Barcelona that both parties are attending.

This follows a new attack from Elliott the previous day, when the browbeating New York hedge fund criticised BHP’s strategy of selling off oil assets one at a time as “death by a thousand cuts” and said its discussions with other shareholders found broad support for a restructuring of the petroleum business and agreement that there should be a renewed focus on capital returns.

Elliott revised its approach somewhat, following regulatory concerns over the unification proposal, proposing that BHP stay incorporated, headquartered and tax resident in Australia, retaining full ASX and LSE listings, but still argued that unification will cost a considerably lower $0.2bn than the $1.3bn BHP states.

Mackenzie gave a speech to the conference on Tuesday where he reiterated his confidence in boosting the value of the company by up to 50% and almost double the return on capital, through cutting costs and carefully managing assets.

Mackenzie said: “Our path is deliberate, with value and returns at the centre of everything we do.”

Recent notes from Deutsche Bank and Citi have agreed that BHP could free up billions of dollars by selling part or all of its petroleum business, although Citi said this would bring only a one-off benefit to shareholders and the company should focus on how to grow value for investors.

Investec analysts said on Wednesday that BHP’s “chronic underperformance” is not as chronic as Elliott makes out and that while BHP has made some poor investments, "in our view it has been no worse than its peers in this regard".

"We have argued previously against a petroleum demerger, but do acknowledge that improved outcomes may be achievable under different demerger methodologies. We also believe that BHP did not address DLC unification adequately in its first response to Elliott, and that it needs to do so this time," Investec said.

"Whatever the outcome, Elliott’s agitation should be good for BHP shareholders, in our view, if only to create greater transparency."