BHP Billiton executives have been warned they could face criminal charges if they shift the company out of Australia.
The US hedge funds Elliott Associates and Elliott International have been trying to convince BHP Billiton’s shareholders in Australia to dissolve the company’s dual-listed structure and move the company to London.
At the moment, the big miner is listed on both the Australian Securities Exchange and the London Stock Exchange, but Elliott has been trying repeatedly to break up the company and list it solely on the LSE.
BHP executives have dismissed the proposal, saying it would cost more than US$1.3bn (A$1.7bn) to dissolve the dual-listed structure just to save less than US$2.5m a year.
They say the move would result in a huge transfer of value from Australian shareholders to London shareholders, too. At the moment, BHP’s Australian shares are trading at a 14% premium to BHP’s London shares.
“The board and management have concluded that the costs and associated disadvantages of each element of Elliott’s proposal would significantly outweigh the potential benefits,” BHP executives said in April.
“We believe that Elliott materially overstates the potential value that could be created by its proposals.”
The Australian treasurer, Scott Morrison, has sent a clear signal to Australian shareholders who may be attracted to the idea that BHP executives could face criminal charges if the deal goes ahead.
In 2001 the Australian government only allowed BHP Limited and Billiton Plc to merge subject to conditions, including that the new company remained listed on the ASX.
Morrison said those conditions applied indefinitely unless revoked or varied by him, and it was clear the proposals from Elliott Associates were inconsistent with those conditions.
“It is unthinkable that any Australian government could allow this original big Australian to head offshore,” Morrison said on Thursday.
“Should BHP Billiton implement the Elliott Associates proposal contrary to the conditions imposed in 2001, it may commit a criminal offence and could be subject to civil penalties under the Foreign Acquisitions and Takeovers Act 1975 (FATA).
“If the company is convicted of an offence, the directors could be held personally liable.
“Further, a proposal by an LSE-listed company to acquire the assets of BHP Billiton Limited would be a significant action under the FATA. Under the FATA, I am able to order that such an acquisition not occur if it is contrary to the national interest.
“If an acquisition proceeds without my consent, I would be able to order a divestment of the assets acquired and take court action to enforce this order. The proponents of the acquisition may also be liable to civil and criminal penalties.”
Matt Canavan, Australia’s minister for resources, supported Morrison’s statement on Thursday. “We take our foreign investment guidelines and regulations very seriously,” he told ABC Radio National on Thursday.
“About 15 years ago, in 2001, BHP merged with another company and that merger was agreed to approval but subject to conditions including that BHP remain listed on the Australian stock exchange.
“On our assessment, clearly, the proposal from Elliott … would breach those conditions and there are penalties to pay if those conditions are breached, so all we are doing is stressing the Australian government’s commitment to uphold our strong and robust foreign investment review framework and that’s something we’ll keep to.”
