The merger will create a formidable enterprise of global scale and diversity, with the capacity and flexibility to pursue international growth opportunities, and with outstanding access to major capital markets, the companies said in an announcement.
BHP Billiton will be run by a unified Board and management team, with headquarters in Melbourne, Australia, and with a significant corporate management centre in London. The existing primary listings on the London and Australian stock exchanges will be maintained, as will the secondary listing on the Johannesburg Stock Exchange (and an American Depository Receipt listing on the New York Stock Exchange).
The combined companies are valued at around $57 billion (aggregate market capitalisation) with an enterprise value of approximately $71 billion.
Paul Anderson will be the chief executive officer of BHP Billiton and Brian Gilbertson will be the deputy chief executive officer. Anderson will retire by the end of calendar 2002, to be succeeded by Gilbertson.
The combined companies own an array of low-cost, long-life operations and are industry-leaders in aluminium, metallurgical coal, seaborne steaming coal, copper, ferro-alloys, iron ore and titanium minerals.
The group’s proforma revenues of approximately US$18.6 billion and EBIT of approximately US$3.3 billion for the 12 months to 31 December 2000, make it one of the largest diversified resources groups in the world.
Proforma EBITDA for the 12 months to 31 December 2000 of approximately US$4.9 billion, will support the development of internal and external growth opportunities across the range of its businesses, the announcement said.
BHP will spin off its Steel assets as a separate business, expected to be completed by the end of 2002.
“This is a sensational fit,” Anderson, managing director and chief executive officer of BHP said.
“The companies balance each other well, with an exceptional breadth of assets and capabilities which have taken many years to develop. The outstanding project portfolio is enhanced by a strong balance sheet, strong capital disciplines and a common commitment to shareholder value.”
“I am delighted to see discussions, which have been going on between us for some time now, bear fruit. Both companies have evolved to the point where we are convinced that by putting together our complementary, high-quality assets with the very best of our skills and people, we will create a resource group that will deliver exciting growth and value for shareholders, customers, communities and employees.
“Additionally, the dual listed structure provides the financial flexibility required to compete in the global capital markets of the twenty-first century,” Anderson said.
Gilbertson, Chairman and Chief Executive of Billiton said, “This merger brings together some of the world’s finest mining, metals and energy assets under a dynamic and unified executive team. Few, if any, of our competitors will be better placed to serve the commodity requirements of our diverse customer base. The financial strength, international scope, and enhanced project skills of the combined group should bring major new growth opportunities internationally. In all of this, there will be unrivalled career opportunities for skilled and ambitious employees.
“Our aspirations include an unequivocal commitment to the highest standards of health, safety and environmental practice, and the creation of sustainable development solutions benefiting all stakeholders, so that the value creation is genuine, broadly-based and enduring.”
Key assets include:
iron ore operations in Western Australia;
Worsley alumina plant in Western Australia;
aluminium smelting operations in Southern Africa;
Escondida copper mine in Chile;
steaming coal operations in South Africa, New South Wales, Colombia and New Mexico;
metallurgical coal operations in Queensland;
North West Shelf LNG operations and the Bass Strait oil and gas fields in Australia; and
ferro-alloy operations in Australia and South Africa.
Following completion of the merger, and taking account of the intended BHP Steel spin-out and the share buy-back recently announced by BHP, it is anticipated that the interests of the shareholders of BHP and Billiton in the single group will be of the order of 58% and 42% respectively.
Mick Davis (currently executive director, finance of Billiton) will become chief development officer, based in London. Ron McNeilly (currently president BHP Minerals) will become executive director, Global Markets.
Charles Goodyear, the current chief financial officer of BHP, will become the chief financial officer of BHP Billiton.
BHP Billiton will establish an eight person executive committee comprising: Anderson, Gilbertson, Davis, Goodyear, Mike Salamon (chief executive minerals), Philip Aiken (chief executive petroleum), Kirby Adams (chief executive steel) and John Fast (chief legal counsel).
An integration team has been established, headed by Brad Mills, chief strategic officer of BHP, and Mike Salamon, executive director of Billiton, to ensure that the new organisation retains the best attributes and talent of the existing organisations, and develops a programme to quickly capture synergies and other benefits presented by the merger.
