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BHP Billiton CEO meets with shareholder Elliott

18 May 2017

Chief Executive Officer Andrew Mackenzie plans to meet with representatives of Elliott Management Corp. this week as the hedge fund continues to push for the sale of the company's USA petroleum business, according to two people familiar with the situation.

Perhaps the greatest effort by Elliott Management has been wanting for BHP to spin off or unload its US oil and gas assets and to increase its returns to shareholders.

One effort has changed, with Elliott dropping its proposal for BHP to drop the dual listing in London and Sydney.

They say that "a more nimble and focused independent petroleum business, with a more disciplined approach to capital management, would have avoided significantly overpaying for BHP's U.S. onshore portfolio". It also conceded there were other options for the oil-and-gas assets and called on the company to launch an in-depth, independent review of its entire petroleum division. Its original proposal to replace this with a London-listed holding company drew a furious response from the Australian government.

Mackenzie outlined BHP's plans, which he argues could lift the value of the company by 50% and double its return on capital.

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The meeting was a chance for Mr Mackenzie to catch up on the changes Elliott made to its proposals this week, and then a chance for Mr Mackenzie to explain his plan for the company.

Elliott has pushed for BHP to "think big" in revamping its operations, taking a line from the miner's new advertising campaign. "It nearly forces BHP to directly address them on this".

"We will review the materials in full and formally respond as appropriate", BHP said in a statement, adding that chief executive Andrew Mackenzie will update shareholders on its plans to significantly grow long term shareholder value.

"We are confident that continued delivery of these plans, from our stronger base today, could grow the value of our company by up to 50 per cent and nearly double the return on capital", he said. The company has pivoted back toward conventional oil-and-gas production and while the shale business now expected competitive returns, BHP was open to discussing a sale of the assets, he said. Mackenzie said technology programs to improve safety, lower costs and unlock resource with an unrisked value of up to United States $12 billion were among the most capital efficient options in the portfolio. "Our path is deliberate, with value and returns at the centre of everything we do", Mackenzie said.

Elliott said BHP's shares have underperformed its nearest peer, Rio Tinto, and the S&P/ASX 200 and the FTSE 100 indexes, over the past two to eight years.

BHP Billiton CEO meets with shareholder Elliott