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Top investor warns BHP Billiton over plan to axe London listing

Mike Henry, BHP's chief executive
Mike Henry, BHP's chief executive

BHP Billiton has been hit with a warning shot from one its biggest shareholders after announcing plans to ditch its primary listing on the London Stock Exchange in favour of the Australian market.

Legal & General said that BHP's decision to give up its slot as the second-largest company on the FTSE 100 is "disappointing" and risks depriving investors of the chance to own a top-tier business.

The riposte from L&G - BHP's ninth-biggest shareholder with a 1.9pc stake - is likely to spark alarm among the miner's executives ahead of meetings next week, when they will seek to sell the decision to fund managers by claiming its complicated structure must be simplified.

It also potentially sets the City investor against New York hedge fund Elliott, which owns 4.7pc of BHP and has previously called for the change.

Nick Stansbury, head of climate solutions at Legal & General Investment Management, said: "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.

"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 shares at present are split between two distinct companies, BHP Group Limited in Australia and BHP Group PLC in Britain, which have shares listed in Sydney and London respectively. The board believes that this arrangement is overly complicated and hampers the company's ability to make quick decisions.

The Australian shares also trade at a premium because the country has a favorable tax regime on dividends. Currently, most of the business's assets are held by the Australian operation.

The £119.3bn miner now plans to work under a unified structure, with a primary listing on the Australian Securities Exchange and a secondary one on the London Stock Exchange. BHP will allow investors in the PLC to exchange their shares for stock in the Australia-listed company.

However, this arrangement would mean the company is no longer eligible to be included in the premium segment of the UK market. It would therefore be kicked out of the FTSE 100 - forcing a sale of BHP shares by funds which track the index and managers who are only allowed to own blue chip stocks.

It is understood that around 15pc of the company's UK stock is held by tracker funds, although not all of these will be affected as some will follow indicies other than the FTSE 100.

Bosses insisted it is the right time for the move after rejecting public calls for the change made by Elliott two years ago.

However, it will be seen as a significant blow to the prestige of London, which has retained its position as a hub for mining stocks even as it failed to attract many major technology floats.

The proposal echoes of Unilever's effort to scrap a dual-listing in London, before it was forced to U-turn after fierce opposition from shareholders including L&G.

BHP also confirmed plans to sell its oil and gas business to Australia's Woodside Petroleum for a 48pc stake in the merged group, and approved $5.7bn of spending on a Canadian potash mine.

Mike Henry, the chief executive, is seeking to reposition the business in line with the shift away from fossil fuels.

Mr Henry said: "Every corporate restructure like this needs to be seen on its own merits. We think the case is compelling.

"It needs to be seen as separate from the ongoing strong commitment we have to the UK market. Nothing is going to change by way of the underlying business. Nothing will change by way of our commitment to engage with UK shareholders."

Mr Stansbury, of L&G, added that BHP’s plan to exit the oil and gas business is "just as significant" as collapsing the dual listing, and showed BHP's commitment to reshaping its business in line with climate goals.

Separately, fellow blue-chip miner Glencore said it has acquired a stake, of an undisclosed sum, in Britishvolt. The battery startup is behind plans to invest £4bn in the UK’s first gigafactory to help equip the country’s car industry for an electric future.

As part of the agreement Glencore will supply the gigafactory - which will be in Northumberland - with cobalt, a raw material used in electric batteries.