BHP Billiton/South 32

Onawingandaprayer

Can someone please explain the financial implications of this 'demerger'?

I had x number of shares in BHP Billiton. Now it appears I will also have x number of shares in South 32. On the basis that no-one ever gets something for nothing, will the value of my BHP shares reduce to take account of the new South 32 shares. And if so, how?

Or is it like Christmas all over again ?

eskbanker

As a shareholder you should have been sent key information to support the voting process, but even if you weren't, it's all on their website as might be expected. http://www.bhpbilliton.com/home/investors/shareholderinfo/Documents/2015/150317_DemergerofSouth32ShareholderCircular.pdf is the main shareholder circular document that explains everything, although, fairly predictably, it states both

What will the BHP Billiton share price be after the Demerger?
There is no certainty as to the price of BHP Billiton Shares after the Demerger.

and

What will be the South32 share price?
There is no certainty as to the price of South32 Shares after the Demerger

cloud_dog

eskbanker wrote: »

.... although, fairly predictably, it states both and

But in theory, if BHP was worth £10 per share and they divested themselves of South 32 which had a value equivalent to 50p per share then BHP share price afterwards should be (in theory) £9.50 per share. (It depends on the values associated with each company and the number of shares in issue)

I say in theory because there are a number of aspects which can impact the BHP share price both negatively and positively after the split.

Perhaps South 32 requires lot of capital investment; devolving BHP of this capital requirement is likely to have a positive impact on its share price.

Perhaps South 32 has an extremely good and growing revenue stream going forward for years to come, this might negatively affect BHPs share price (but would be good for South 32).

eskbanker

cloud_dog wrote: »

I say in theory because there are a number of aspects which can impact the BHP share price both negatively and positively after the split.

Yes, that was my point (and theirs), it's not as simple as deducting the value of one company from the other, i.e. nobody really knows how the practice will differ from the theory and how it'll be perceived by the markets!

Glen_Clark

Share split happened today apparently, but not showing in my x-o account as yet

Onawingandaprayer

Not appearing in H-L either.

planteria

cloud_dog wrote: »

But in theory, if BHP was worth £10 per share and they divested themselves of South 32 which had a value equivalent to 50p per share then BHP share price afterwards should be (in theory) £9.50 per share.

that has to be the starting point. so it isn't Christmas, it's a split. at the same time, BHP have determined that splitting is a good move, overall, so, in theory, it will be good for shareholders if they have made the right decision.

Glen_Clark

As I understand it, we should now hold the same number of shares in South32 which are currently trading at 115p https://www.google.co.uk/finance?q=LON%3AS32&sq=South32&sp=4&ei=nFNaVenWOcr58gPM6IHoDA

themanfromamarillo

I was looking at BHP shares a while back and the whole South32 thing was one thing that put me off. Am I right in saying it's a Sydney listing? If so a load of FTSE 100 tracker funds just got a pile of shares in a company in another country.

Onawingandaprayer

Just re-read my documentation re this. They'll be listed in London from 26th May apparently.

Can't wait...

alanq

themanfromamarillo wrote: »

If so a load of FTSE 100 tracker funds just got a pile of shares in a company in another country.

As you realised the shares will also be listed in London.

However, it is true to say "a load of FTSE 100 tracker funds just got a pile of shares in a company that is not included in FTSE 100".