BHP Billiton Board Recommends Shareholders Approve Demerger Of South32

(RTTNews) - Mining giant BHP Billiton Ltd.'s (BHP, BHP.AX, BBL, BLT.L) board recommended shareholders approve the proposed demerger of South32 at the shareholder meetings to be held on 6 May 2015.

South32 intends to distribute a minimum of 40 per cent of Underlying Earnings as dividends to its shareholders following each six month reporting period, beginning from the period ending 31 December 2015.

The total one-off costs of implementing the demerger are estimated to be approximately US$738 million or US$641 million after tax. These comprise stamp duty and cash tax of US$339 million, South32 set up and separation costs of US$254 million and execution costs of US$145 million, including financial advisor costs of US$30 million.

BHP Billiton said it intends to streamline its organisational model and expects this to generate functional cost savings of approximately US$100 million (pre-tax) per annum, with 90 per cent of this saving achieved by the end of the 2017 financial year. This saving is in addition to the reduction in costs resulting from the removal of the South32 businesses. One-off restructuring costs of approximately US$55 million (pre-tax) are expected to be incurred in connection with implementing the organisational changes required to achieve these savings.

In the longer term, following the simplification of its portfolio and streamlining of organisational design, BHP Billiton believes it will be able to further focus on improving the performance of its core operations and achieving substantial productivity benefits beyond the US$4 billion per annum of productivity-led gains (by the end of the 2017 financial year) already targeted.

South32 is expected to incur additional costs of approximately US$60 million (pre-tax) per annum associated with operating as a stand-alone listed company relative to those incurred operating the South32 businesses as part of the BHP Billiton Group. However, these additional ongoing overhead costs are expected to be outweighed in the near term by the ongoing savings generated by South32's regional model.

The proposed demerger would be effected via a distribution of South32 shares by way of an in-specie dividend to shareholders in both BHP Billiton Limited and BHP Billiton Plc. Eligible BHP Billiton shareholders will receive one South32 share for every BHP Billiton share held on the applicable record date.

The company noted that South32 will apply for its shares to be admitted to trading on the ASX, LSE and JSE and will have an over-the-counter ADS program in the United States.