MINING AND PETROLEUM
Change expected from new BHP chairman
BHP’s new chairman is about to shake things up at the world’s largest mining company
Singapore — BHP’s new chairman is about to shake things up at the world’s largest mining company, according to Sanford C Bernstein, which says that Ken MacKenzie will probably undertake a full-scale review of assets and strategy, and may demerge the petroleum business.
"Despite management’s reluctance to change at this stage, we believe that BHP is about to experience a radical shift in strategy, driven by the arrival, effective September 1, of the new chairman," said analysts including Paul Gait.
MacKenzie used to run a packaging business, and his "detachment from the mining sector makes him, we believe, inevitably far more objective on the best direction BHP should take from now on".
BHP has been the target of an activist investor campaign in recent months spearheaded by Elliott Management Corporation, which has rounded on management decisions that the fund claims have destroyed about $40bn in value.
MacKenzie’s arrival to replace Jacques Nasser has been welcomed by Elliott, and Bernstein said it understands that the investor and MacKenzie share common views on the future of the company.
"We welcome the arrival of a chairman who is detached from industry pressures, can take a fresh look at the BHP portfolio and is unencumbered by the need to defend legacy investment decisions and portfolio-commodity choices," Gait said, upgrading BHP to outperform.
"BHP is not the natural owner of oil assets, as we see no obvious synergies between mining and petroleum production. Splitting the two businesses apart, on the other hand, could allow the disclosure of their full value." BHP’s stock in London rose 1.9% to 1,251p on Wednesday, the highest since April. Bernstein’s price target is 1,500p, and it said it valued the mining business alone at 1,310p a share, according to the July 5 report.
Montreal-born MacKenzie, a skier and yachtsman, joined BHP’s board in September 2016 after lifting the market value of global packaging behemoth Amcor by more than 150% in a decade-long spell as CEO.
Last week, departing chairman Nasser said the timing of BHP’s $20bn spree in US shale in 2011 was a misstep and that if the miner could go back in time, it wouldn’t have invested in the assets.