BHP Taps Experienced Executives to Fill Out Changes in Board -- Update

By Robb M. Stewart Features Dow Jones Newswires

MELBOURNE, Australia-- BHP Billiton Ltd. said it plans to replace two directors amid its monthslong tussle with activist investor Elliott Management Corp., following the miner's decision earlier this week to exit its American shale oil and gas business.

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Elliot has built a 5% stake in BHP's British shares, and specifically called on BHP to exit from the U.S. shale business. Elliott and others have called for deeper changes, including adding more industry veterans to the board.

It wasn't clear if Elliott had a role in the board changes BHP detailed Wednesday, including the departure of Grant King just six months after his appointment. The New York hedge fund declined to comment. BHP stressed the decisions by Mr. King and Malcolm Brinded to step down were their own.

Elliott's agitation, made public in April after months of earlier discussions, brought into the open shareholder disquiet over BHP's mistimed investment in shale and subsequent impairment charges. Its tussle with the British-Australian company threatened to cast a shadow over annual shareholder meetings in October and November, when shareholders are to vote on board members.

Among its proposals, Elliott had called for the appointment of Chairman-elect Ken MacKenzie to be followed by new directors with the skills and experience to simplify BHP's structure, improve returns and allocate capital "more wisely." Other shareholders including Tribeca Investment Partners had sounded out potential board nominees more sympathetic to focusing on shareholder returns.

Mr. King's departure is a victory for investors unhappy with his appointment. The new directors bring decades of finance- and energy-industry experience between them.

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Whether a direct response to Elliott or not, the board shuffle is another victory for the activist fund, which has had mixed success effecting change at some of its overseas targets recently. A bid by Elliott to force Dutch paint giant Akzo Nobel to discuss a merger with U.S. rival PPG ultimately wasn't successful. It also hit resistance from Australia's government to a proposal that BHP's dual structure be collapsed around a single main listing in London.

On Wednesday, outgoing Chairman Jac Nasser said Mr. King had decided not to stand for election to the board at the annual meeting because of concerns expressed by some investors.

Mr. Brinded also has opted not to stand for re-election as a nonexecutive director due to his involvement in ongoing legal action in Italy related to his past employment at Royal Dutch Shell PLC, Mr. Nasser said.

In their place, the resource company's board will bring in Terry Bowen, finance director at Australian coal-to-retailing conglomerate Wesfarmers Ltd., and former BP PLC veteran John Mogford from October.

A day earlier, BHP said its American shale operations aren't core and it would seek to exit, possibly through a series of trade sales, an initial public offering or other means. Management has acknowledged the company overpaid to get a foothold in the onshore U.S. industry and had grown to realize that the business couldn't be replicated globally as shale-oil opportunities don't exist on the same scale elsewhere.

Elliott had called for the company to sell the shale operations and to launch an independent review of its global petroleum division.

Craig Evans, a portfolio manager at Tribeca in Sydney, said he applauded the changes at BHP in recent days but declined to comment on specific directors. "The majority of the board there just haven't seemed to give adequate direction that shareholders should expect," he said. "The spread of experience hasn't seemed appropriate for the type of company that BHP is."

Mr. Nasser, who will step down as chairman at the end of the month, said he regretted that Mr. King would also leave the board at the end of the month. Mr. King led Origin energy after it was spun off from building-products firm Boral Ltd. in early 2000 until last year, and faced a backlash in Australia at the end of his tenure for the company's debt-fueled investment in one of three gas-export projects in Queensland state that launched amid a slump in prices, weighing heavily on the company's share price.

Mr. Brinded, a director since April 2004, will step down from the board in October, although Mr. Nasser said he looked forward to him being able to return in the future. He chose to leave given his involvement in ongoing legal proceedings in Italy related to Shell, where he was a director between 2002 and 2012. Italian prosecutors are investigating Shell's involvement in a US$1.3 billion deal in 2011 with Italian oil firm Eni SpA and the Nigerian government for a lucrative Atlantic Ocean oil license.

Neither Mr. King nor Mr. Brinded were immediately reachable for comment.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

August 23, 2017 06:06 ET (10:06 GMT)