BHP’s decision to leave the FTSE 100 is no disaster for London

The mining giant’s decision to unify in Sydney makes sense – its roots were always in Australia

Last modified on Tue 17 Aug 2021 15.36 EDT

Farewell, BHP, one of the largest companies on the London stock market at almost £130bn.

The Melbourne-based mining company has tired of its clunky dual-headed Anglo-Australian corporate structure and wants to unify as a purely Australian entity with a primary listing in Sydney. It’ll keep a listing in London but it won’t be a “premium” version, the only sort that gets you into the FTSE 100. A large hole will appear in the UK’s blue-chip index.

A humiliation for London and its capital markets? A blow for the “open for business” refrain that ministers find so addictive? Well, yes, but only up to a point. Unilever’s failed attempt to go Dutch a couple of years ago was a genuine reason to be indignant, because the consumer goods giant’s logic was flimsy. BHP has a better story, even if it’s not the one it was telling only a couple of years ago.

For starters, the company is obviously Australian by history and culture. Its on-the-ground presence in the UK amounts to an office in Victoria in London. The dual structure arose only from the 2001 merger with the London-listed Billiton, most of whose mines have subsequently been demerged or sold.

Unilever, by contrast, was at least half-British by roots and has big operations here. Its board’s desire for a single corporate home in Rotterdam looked to many like a case of a Dutch chief executive and Dutch chairman seeking sanctuary from would-be predators after their close encounter with the unlovely Kraft Heinz. London always looked a more natural place for Unilever to unify, which is what happened eventually.

There’s no parallel escape plot at BHP, which is far too big for anybody to take a tilt at. There could also be a soft bung for UK plc shareholders if the shares flutter upwards to meet the rating in Sydney, where the Australian limited shares have traditionally enjoyed a chunky premium versus the plc variety, thanks to Australia’s relative generosity on dividend taxation. At the very least, that factor should compensate for forced selling by UK tracker funds.

The aspect that might still worry BHP’s board is that, as at Unilever, the proposal needs support from 50%, plus one vote from individual shareholders in each category of share. So this is one of those rare occasions when 10 shares carry the same clout as 10m, creating the potential for a grassroots rebellion. That’s one danger in the proposal: income-hungry UK investors seem to like owning BHP shares and having them in the FTSE 100.

Another risk is that BHP will end up accounting for about one-eighth of the entire Australian stock market, which could be too much dominance for its own good. On the other hand, one can see how having a single class of share could make deal-making easier.

A shareholder lobby, in the form of activist Elliott, has been pressing for simplification for years, so one suspects the proposal will be backed, after some huffing. Yes, it’s a setback, but London is hardly underweight in large mining stocks. It can probably afford to take this one on the chin.

BT’s new boss could have a bumpy ride ahead

Chairing BT isn’t quite the prestigious gig of old, but it remains a political one given the company’s critical role in building full-fibre broadband in the UK.

Adam Crozier looks a decent pick. He’s had dealings with Ofcom, BT’s regulator, twice in his executive days – first at Royal Mail and then at ITV – and the former role gave experience at a company with a large, unionised workforce. He’s also a smooth public performer, which few people ever said about his predecessor as BT chairman, the old-school Jan du Plessis.

None of which will matter a jot if Crozier can’t get a handle on Patrick Drahi, the French-Israeli telecoms billionaire who has built a 12.1% stake in BT via his Altice group.

Drahi’s intentions remain unclear. A big reveal is tentatively expected in December, when a six-month non-bid period expires. The speculation ranges from quiet long-term support to a demand for a break-up of BT to liberate the value supposedly trapped within Openreach, the broadband operation.

Any ideas must be considered, but Crozier’s default position should be to stick to basics. BT has secured good long-term regulatory terms to fund fibre rollout, while Rishi Sunak, the chancellor, has made life sweeter by granting “super deductions” on tax on infrastructure spending for two years. The customers expect BT to get on with the job, rather than play games of financial engineering.

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