The views expressed in this article represent those of the author, not necessarily those of ShareSoc.
As a small shareholder in BHP Group (BHP) I have just received a heavyweight document (285 pages) explaining the proposed unification of the company. This proposal is to remove the dual listed structure of the Australian and UK companies and the complex corporate structure associated with that.
For UK shareholders of BHP Group Plc this will mean, if it is voted through, that you will have your Plc shares replaced by Depositary Interests (DIs) in BHP Limited (the Australian company), on a one for one basis. Those DIs will be administered by Computershare and this is similar to how most foreign registered shares are managed. Those with BHP Group Plc paper share certificates will have those replaced by electronic DIs. Share dividends will be paid directly to you in sterling as before.
For those with very small holdings of certificated Plc shares there is a facility to sell your shares if you do not wish to hold the Ltd shares in future.
One major implication is that the new Limited Shares will not be covered by a Primary Listing in the London Stock Exchange but will likely be only a “standard” listing. This may cause some institutions who manage index-based funds such as UK focussed trackers to need to sell the shares, although as the new shares will increase the total number of Ltd shares listed worldwide there may be purchasing of the shares by other funds to maintain their index proportions. There may be some short-term volatility in the share price as a result.
At present the price of the Australian listed shares can significantly differ from the UK listed shares, after accounting for exchange rates. The unification will mean only one price applies in future. BHP Plc shares have historically traded at a lower price than the Limited shares and that differential will be eliminated.
Note that the exchange of shares for UK shareholders should not incur any capital gains liability – it will be treated as a “roll-over” not a sale/purchase transaction. There will also be no Australian withholding tax applying to future dividends.
BHP management gave a presentation to ShareSoc members this week on the unification which I watched and as a result I can see no reason not to support this transaction. Hence I will be voting in favour.
The above is a simple explanation of a complex transaction. So please read the supporting documents for the meetings at which this transaction will be voted upon on the 20th January. You can also log-in online to view the meetings. Go to https://www.bhp.com/unify for more explanation, the shareholder circular and prospectus.
But please make sure you vote your shares, including those in any nominee accounts!
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
Just to clarify one point: whilst the prices of shares traded in the UK and Australia should be broadly similar after unification (as the DIs in London will then be directly equivalent to a share traded on the ASX which was not the case previously), they will not identical. Arbitrage will ensure that they don’t diverge significantly but small differences may arise, especially where events occur during market hours on one exchange whilst the other exchange is closed. During UK winter time, the ASX is open between 11pm and 5am UK time.