BHP Shows Renewed Appetite For Deals
March 17 2016 - 3:02AM
Dow Jones News
(FROM THE WALL STREET JOURNAL 3/17/16)
By Rhiannon Hoyle
MELBOURNE, Australia -- BHP Billiton Chief Executive Andrew
Mackenzie has spent three years tackling the legacy of his
predecessors' hunger for significant deals, selling unwanted assets
and taking multibillion-dollar write-downs on its U.S. shale-gas
operations.
Now, he says the world's biggest mining company by market
capitalization has an appetite for acquisitions again.
In an interview, Mr. Mackenzie said BHP is sizing up deals for
petroleum and copper assets that could offer an immediate boost to
profit amid what the company now expects to be a prolonged period
of low commodity prices.
"We are very active in looking at areas where we might acquire
assets that would fit very well within our portfolio and that would
increase the scale of the company without increasing its
complexity," he said.
Mr. Mackenzie was speaking after a difficult period for BHP as
it adapts to a slide in prices for the main commodities it sells,
including iron ore, oil and gas, and coal.
Some analysts have warned BHP could be tempted to overpay for
assets, while others question whether there will be willing sellers
of the sort of high-quality assets that BHP has historically been
eager to buy.
Last month, the company slashed its dividend by 74%, abandoning
a long-held pledge to keep its annual payout steady or rising, as
it announced a $5.67 billion loss for the six months through
December.
In November, a dam burst at the company's jointly owned Samarco
iron-ore mine in Brazil caused widespread environmental damage.
BHP's share price is down nearly 50% over the past year, while
Moody's Investors Service and Standard & Poor's Ratings
Services have both recently cut their credit ratings on the
company, to A3 and single-A, respectively.
Mr. Mackenzie said "Plan A" for BHP remains its drive to lower
costs and raise productivity, in part by cutting an
as-yet-unspecified number of jobs, particularly in head-office
roles.
But he said savings from reducing its dividend, along with extra
cash the company could generate as it works existing operations
harder, could give BHP the firepower to pursue acquisitions. Some
of BHP's rivals, such as Anglo American PLC and Vale SA, recently
said they might sell assets to help shore up their balance
sheets.
"At this point in the cycle, a company like us -- that is doing
a good job on productivity, that has now got a very fit-for-purpose
dividend policy and the financial flexibility that goes with it --
could well be a beneficiary of other companies that are not as
well-placed as us," Mr. Mackenzie said. "And we certainly wouldn't
want to miss out on those benefits."
Mr. Mackenzie declined to comment on analysts' forecasts that
BHP could spend as much as $5 billion on an acquisition. He said he
was "very keen to stress that it is perfectly possible that nothing
will emerge that will pass our tests" and said the company also
could use spare cash to pay down debt.
(END) Dow Jones Newswires
March 17, 2016 02:47 ET (06:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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