BHP backs itself against activism
BHP CEO Andrew Mackenzie has implored investors to back the current management amid fierce investor activism.
“I would say to the BHP shareholders, stick with the plan we have through real engineering, and the real hard work of BHP women and men to lift the value of the company,” he told reporters.
Bell Potter resources analyst Giuliano Sala Tenna says the giant activist Elliott Management hedge fund is a formidable opponent.
“I just wonder if they've bitten off more than they can chew here,” he said.
“BHP is not what I'd describe as a company that's under pressure — its balance sheet is very strong.”
“They've paid down a huge amount of debt recently, they spit out a huge amount of free cash flow.
“They're not going to be a company pressured into making a decision to satisfy the needs of one shareholder, who is looking at a better return on their short-term investment."
Elliott took a 4 per cent holding in BHP over a year ago, and has since pushed the company to launch an in-depth independent review of its petroleum operations.
“Elliott taking on what is still called 'the big Australian' is probably good for their publicity as well,” says Rob Brierley, head of research at Patersons Securities.
“They're clearly a frustrated shareholder — it can stir the pot and activate other shareholders who aren't 100 per cent happy with performance.
“It's been a tough few years with the Samarco dam collapse and a number of other things going against them, the oil price collapsing and iron ore price under pressure.
“It's not the easiest time and that's generally when people look at things and say the company's underperforming.”
Elliott has also described BHP as a chronic underperformer and accused it of misleading shareholders.