Shares in BHP fell overnight in Australia and opened down in the UK after criticism by investors of the mining giant’s plan to axe its primary London listing in favour of Sydney.
Asset manager Legal & General yesterday branded the announcement that BHP could leave the London Stock Exchange as “disappointing” and said UK investors could miss out on future growth.
The intervention from L&G follows the announcement by BHP on 17 August that it would unify its corporate structure under its existing Australian parent company.
BHP shares in London fell 1.4% in early trading to 2,325p, while in Sydney shares closed down 7% at AUD 47.7.
“Today’s announcement is very significant – with the likely outcome that BHP leaves UK indices. If this is indeed the case for UK index investors it is our view that losing a company of the calibre of BHP is disappointing,” Nick Stansbury, head of climate solutions at Legal & General Investment Management, said.
“However, BHP’s proposal is supported by a robust and clearly articulated value case with the potential for investors in the UK company to benefit from the possible narrowing of discount to the Australian company.
“It is important UK index investors are able to realise that benefit and we will continue to review the proposal with this in mind.”
BHP is likely to be backed in the move by activist hedge fund Elliott, which owns 4.7pc of the miner and has previously called for the change to happen.
BHP shares in London rose more than 3% yesterday on the news as investors bought UK-listed shares which can trade at a discount to Sydney-listed shares because of a more benign regime of taxing dividends in Australia.
BHP said the change — due to be implemented in the first half of 2022 — would result in a corporate structure “that is simpler and more efficient, reduce duplication and streamline our governance and internal processes”.
“Now is the right time to unify BHP’s corporate structure,” said Ken MacKenzie, chair of BHP.
Other investors remained positive on the outlook for the firm, with eyes now turning to whether the City could miss out going forward.
Freetrade senior analyst, Dan Lane says: “If inflation does stick around and the market starts to get nervous at the prospects for high flying US equities, it could be the likes of BHP that benefit.
“The UK market is currently valued lower than all major global regions, mostly because of its exposure to seemingly unexciting sectors like mining. If inflation starts to bite, the firms at the very beginning of the supply chains could start to look a lot more attractive.”
Jamie Maddock, equity research analyst at Quilter Cheviot said business was “looking to transition to the new economy, exiting legacy industries and looking to the future for its returns.”
“BHP will look to continue to take advantage of the global economic reopening and the potential for an increased bout of inflation. This will help in the short-term, but execution on the longer-term strategy will be crucial to keep investors happy.”
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