The BHP Group Ltd (ASX: BHP) share price is in focus today as the resources giant confirms it’s going to proceed with its unification.
At the moment, BHP has two parent companies under a dual-listed company structure, one in Australia and one in the UK (BHP Group Plc). They have separate share registers but operate as a unified economic entity.
On 17 August 2021, BHP announced the intention to unify. There has been a significant reduction in the earnings contribution from the UK’s assets and a material reduction in the expected costs of unification.
BHP to proceed with unification
The board of BHP believes unification is in the best interests of shareholders, resulting in a corporate structure that is simpler and more efficient. It will reduce duplication and streamline governance and internal processes.
A unification will also improve flexibility for portfolio reshaping to maximise shareholder value over the long-term, including facilitating a simpler separation of the petroleum business.
It will have its primary listing on the ASX, but there will still be other listings in London, Johannesburg and New York.
The total transaction costs relating to unification are currently estimated to be between US$350 million and US$450 million pre-tax.
Leadership comments
BHP Chair Ken MacKenzie said: “BHP is in great shape and now is the right time to make strategic, transformative changes for the future. Unification will create one parent company, one share register and one share price globally. We believe this is the best structure for BHP to provide the resources the world need and create long-term shareholder value.”
BHP CEO Mike Henry said: “A unified corporate structure will make BHP simpler and more agile, with the strategic flexibility required to shape our portfolio to deliver value through producing the commodities needed for continued economic growth, improved living standards, electrification and decarbonisation.”
Summary thoughts on the unification and the BHP share price
Unification is expected to complete by 31 January 2022, subject to various approvals.
There are plenty of advantages to making the change and it seems like management think now is the time to do it.
BHP shares are down 26% since the start of August 2021. I think it’s a better time to buy now than through most of 2021. Some of its commodities are at strong prices, the main one (iron ore) has been crunched. Blue chip income investors interested in BHP could decide to buy a parcel of shares and look for more on price weakness.
