The Strategist

BHP merges its oil and gas division with Woodside, gives up listing in London

08/18/2021 - 10:46

Australian company BHP Group - the largest mining company in the world - announced a merger of its oil and gas division with another Australian company Woodside Petroleum.
Woodside will pay for these assets with its shares, so now a 48 percent stake in this company will belong to BHP shareholders. The current shareholders of Woodside will retain 52% of the shares. Thus, the oil and gas division of BHP is valued at $13 billion, slightly lower than analysts expected after yesterday, August 16, it became known about negotiations between the companies. Nevertheless, it is one of the biggest oil and gas deals of the year.

The deal would put Woodside, which was already one of the largest independent oil and gas companies, in the top 10 of such companies in the world. Its value is now estimated at $ 28 billion. The synergistic effect of the transaction, according to companies, will amount to $ 400 million a year. Meanwhile, BHP will be able to focus on its core business - iron ore, copper, nickel and some other minerals.

At the same time, on Tuesday, BHP reported on its fiscal year that ended at the end of June. Its net income for the year reached $11.3 billion, which was the highest in the last ten years. In addition, the company said it paid a record dividend of $5.7 billion. The company's good results are primarily due to rising iron ore prices.

In addition, BHP announced that it will refuse a dual listing - trading its shares on two exchanges at once. BHP stock will no longer be traded on the London Stock Exchange, where it was traded at a significant discount relative to the price on the Australian exchange. BHP's British legal entity will now be merged with the Australian one, and the shares will be traded only on the Sydney Stock Exchange. BHP's dual listing, as well as having two legal entities and two headquarters, has been in place since 2001, when Australian BHP merged with British Billiton. With BHP's departure, the British FTSE 100 stock index loses one of its largest companies.