BHP shake-up suggests activists' campaign is biting

BHP's Fayetteville Shale operationImage copyright Ken Childress Photography Image caption BHP's Fayetteville Shale operation, now due for sale

A shake-up at mining giant BHP suggests that pressure from activist shareholders is starting to bite.

BHP has replaced two directors and said it will sell its shale gas operations, while reporting a surge in profits.

The moves are precisely what two of its biggest shareholders have been demanding.

The shares are on the up[1] on the news, but a big question is how much further will the "activists" drive the company?

Leading them is Elliott Management, the New York-based hedge fund which now holds 5% of BHP's shares.

Demands

Earlier this year it demanded four big changes at Billiton[2]:

  • Drop its dual London/Australia listing and be incorporated in Australia.
  • Increase returns to shareholders
  • Get BHP out of shale and review its petroleum operations.
  • Make sweeping changes on the BHP board

A month or so after these demands were published the Australian boutique hedge fund Tribeca stepped into the fray.

Image copyright BHP Image caption Ken MacKenzie takes over as chairman in September

It sent an eight-page letter to its investors entitled "Making BHP Great Again", calling for roughly the same measures.

However, Richard Knights, mining analyst at the brokerage and investment bank Liberum, says that even with its 5% stake Elliott has limited direct influence.

But he adds:"They've been loud in terms of getting their message across, and BHP seems to have been prompted by shareholders to address these issues now."

The exit from shale is the most obvious change.

BHP had bought into the industry at the top of the market in the gas fracking boom in 2011.

A slump in oil prices forced a $7.2bn write down last year and analysts expect BHP will now get $10bn for the business - about half what it paid for it.

Whether BHP is going to go further and get out of its oil operations as well seems unlikely.

Mr Knights says:"Even if Elliott thinks they should review their oil operations, BHP has made it clear with these last results that it is not going to get out of conventional oil right now because it believes the oil price is going to go up."

Elliott believes changing BHP's dual listing in London and Sydney could increase the value of the company by $11bn by changing the way its dividends to shareholders are taxed.

Mr Knights believes the changes might work, but there are taxation complexities, and calculating the benefit is difficult due to taxation complexities

Board shake-up

The more significant changes, announced on Wednesday[3], are on BHP's board of directors.

In June Elliott backed the appointment of Ken MacKenzie to succeed Jac Nasser as chairman.This, Elliott said, was "a constructive step in bringing much needed change to the direction of BHP".

Mr MacKenzie, who starts next month, is from the packaging group Amcor which he had transformed from an Australian business into a Swiss-based global operation stretching across 40 countries.

Now BHP has said two other members of the board are to be replaced.

Grant King, formerly of Origin Energy and only appointed as a director in March, stood down, "owing to concerns expressed by some investors," according to BHP's statement.

King had been tipped to succeed Jac Nasser as chairman, but these "concerns" are over his old job at Origin.The company grew impressively for the 16 years he was there, but crucially he backed the building of a $19.7bn liquefied natural gas plant which led to a plunge in the company's share price in 2015 and massive write downs.

Image copyright Getty Images Image caption Still under pressure - BHP chief executive Andrew Mackenzie

Similarly, it is shadows from the past that have forced another director, Malcolm Brinded, to step down.He was formerly Head of Upstream at the oil giant Royal Dutch Shell.

Italian prosecutors are alleging that he, along with other executives at Shell and the Italian energy group Eni, were involved in a series of kick-backs and bribes connected with the rights to a huge Nigerian offshore oil block, known as OPL 245.All the accused have denied any wrongdoing.

In their place have come Terry Bowen, from Australia's Wesfarmers, and John Mogford, who spent 33 years at BP.

The shareholders, however, seem to want more scalps, specifically the removal of the chief executive Andrew Mackenzie.

In May Tribeca analyst James Eginton told Reuters "The problem with the current CEO is he's an appointment of the current board.From that perspective we'd be looking at seeing the CEO moving on."

For now, however, Mackenzie seems secure.

Mr Knights says::"Some shareholders seem to have issues about the direction McKenzie has taken the company, but really his future depends on his ability to convince the new Chairman of his vision."...

References

  1. ^ shares are on the up (www.bbc.co.uk)
  2. ^ four big changes at Billiton (www.fixingbhp.com)
  3. ^ announced on Wednesday (www.investegate.co.uk)

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Royal Mail's new electric vans unveiled

One of the larger electric vansImage copyright Royal Mail Image caption The new vehicles will be trialled from today

Royal Mail is beginning trials in London of nine fully electric vans with ranges of up to 100 miles.

The vehicles, which come in various sizes, will distribute post from the central London depot.

They were produced by Oxfordshire-based carmaker Arrival, which recently opened a new factory in Banbury.

Another batch of 100 electric vans for Royal Mail has also been ordered from Peugeot.

Having already been trialled by Royal Mail, these will enter service in December.

Arrival says the nine vehicles it has supplied come in sizes of three and a half, six and seven and a half tonnes.

Image copyright Arrival Image caption The new electric vans - one of the smaller ones is shown here in a digital render - have a range of up to 100 miles

Although the current prototype versions of the vans are fitted with wing mirrors, a spokeswoman for Arrival told the BBC they will be removed from the final design - as cameras will be used to monitor traffic to the rear instead.

Royal Mail was "delighted" to be collaborating with Arrival, said Paul Gatti, Royal Mail Fleet's managing director.

"We will be putting them through their paces over the next several months to see how they cope with the mail collection demands from our larger sites," he added.

Royal Mail's fleet comprises about 49,000 vehicles in total.

"European postal providers, starting with DHL in Germany, have been taking this approach for a while now," said Ananth Srinivasan, a mobility expert with research consultancy Frost &Sullivan.

He added that five countries - the UK, Germany, France, Italy and Spain - had the potential to convert significant proportions of their fleets to electric vehicles in the coming years.

"Our research indicates that by 2025 these countries may have 100,000 postal service vehicles going electric between them," he told the BBC....

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Trump luxury hotel given £110,000 Scottish tax rebate

Donald Trump at a news conference held at the Trump TurnberryImage copyright Reuters Image caption Donald Trump's five-star luxury golf course resort in Scotland has received a £110,000 tax rebate

US President Donald Trump's luxury hotel in Scotland has received a £110,000 tax rebate meant to help struggling small businesses.

The £11m Trump Turnberry resort in Ayrshire has had its property tax reduced by £109,530, South Ayrshire Council has confirmed.

The relief cuts the hotel's annual rates bill by 13.5%.

The business rates relief scheme[1] was launched to help revive the country's struggling tourism industry.

In February, Scotland's finance secretary placed a 12.5% cap on rising business rates for 8,500 firms in the hospitality sector, which includes hotels, restaurants, cafes, pubs and other businesses.

South Ayrshire Council said that the tax relief awarded for the 2017-18 financial year was mandatory and as such, had to be awarded.

Trump Turnberry, a luxury golf course resort, is expecting record revenues of up to £18m this year and has forecast a profit after years of losses.

"From the business we have on the books so far, the pace is telling me the Trump Turnberry will have its best year of revenue in 100 years," Trump Turnberry's general manager, Ralph Porciani, told the Guardian[2] in January.

The information first came to light in response to a Freedom of Information (FOI) request made by Scottish news site The Ferret[3], as part of a joint investigation with the Guardian.

"Our hospitality rates relief is available to 8,500 businesses and 100,000 small business properties - half of all properties - pay no rates at all," said a Scottish government spokesman.

"It is for businesses to apply for rates relief and for councils to ensure those which do are eligible.

"The Barclay Review[4], published today, provides recommendations for further reforming the system including around golf courses, and ministers will respond to the report swiftly."...

References

  1. ^ business rates relief scheme (www.bbc.co.uk)
  2. ^ the Guardian (www.theguardian.com)
  3. ^ The Ferret (theferret.scot)
  4. ^ The Barclay Review (www.gov.scot)

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Whole Foods shareholders back Amazon deal

Customers shop for produce at a Whole Foods market on October 15, 2014 in San Francisco, California.Image copyright Getty Images Image caption Analysts expect Amazon's acquisition to lead to increased options for online ordering and delivery of food

Amazon's plan to buy Texas grocer Whole Foods for $13.7bn (£10.7bn) cleared an initial hurdle on Wednesday, as shareholders of the supermarket voted in favour of the deal.

Shareholder approval had been expected for the bid, which has been greeted as a game-changer for the food industry.

The merger would combine Whole Foods' physical footprint with Amazon's delivery prowess.

US competition authorities must now sign off on the deal for it to advance.

Whole Foods approached the e-commerce giant about a merger this spring, as it grappled with falling sales and pressure from investors such as Jana Partners to improve performance.

Amazon initially offered $41 per share, eventually bumping the price to $42 per share.The $13.7bn value includes assumption of Whole Foods' debt.

Physical footprint

The deal allows Amazon to leap into the food industry, an area that it has been experimenting with for years.

It also gives the e-commerce firm an instant physical footprint via Whole Foods' 470 stores in the US, Canada and UK.

That matters because customers still prefer to shop in person, said Miriam Burt, a research vice-president in retail at Gartner,

"For almost all categories of products besides books, music and videos, our research is telling us that customers still prefer to go into the store and interact with the products," she said.

Ms Burt said she expected that all grocery stores would eventually develop a hybrid model of online ordering and in-store pick-up.

Walmart, one of the biggest food retailers in the US, said it was moving in that direction on Wednesday, as it said its products would be available via the voice-activated Google Assistant[1].

"Each of the major grocery retailers will get to a point where they suggest a use case where you're driving home from work, you order your groceries online and then you pick it up from your local store.It's about making the customers' lives easier," Ms Burt said....

References

  1. ^ the voice-activated Google Assistant (www.bbc.co.uk)

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