The mining firm BHP Billiton announced on Tuesday it intended to spin off several assets into a new international metals and mining company to be listed in Australia.
The new firm will have assets in five countries and to concentrate in aluminum, coal, manganese, nickel and silver. Some of the assets to be spun had been bought by BHP as a component of the merger with Billiton in 2001, the New York Times reported.
BHP Billiton said after the restructuring it will continue to emphasize on its large operations involving long-life iron ore, potash, petroleum, coal and copper.
The mining giant first said in April it was thinking of structural changes to its operations. Last week, BHP said its best choice was to spin off some assets.
Before the announcement on today, analysts had anticipated the miner might carve off assets worth as much as $14 billion.
The company has disposed about $6.5 billion in assets over the past two years as it sought to streamline operations.
The spinoff would make it possible for BHP Billiton to cut costs and enhance productivity of its remaining operations, the company said.
BHP Billiton’s CEO Andrew Mackenzie said in a statement that the reorganization allow the firm to grow in the direction of a simpler portfolio, generate higher margins and higher returns.
The assets the company retains after the restructuring contributed 96% of its pre-income tax underlying earnings in the fiscal year that ended June 30.
“A demerger is a logical next step for other high quality assets also in our portfolio that don’t have a scale of those in our major business,” Reuters quote Mackenzie as telling shareholders.
Christopher Moore of Fidelity Global Industrials Fund, which holds stake in BHP Billiton, said he was hopeful that the spun off assets would perform better under a more focused management.
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