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BHP Group Plans to Make Australia its Primary Stock Market

Shares of Woodside Petroleum and BHP Group dropped on Wednesday as investors raised questions about the value of Woodside Petroleum’s proposed merger with BHP Group’s petroleum arm. Woodside Petroleum’s shares fell partly due to worries about an overhang of stock as BHP investors who want to get out of fossil fuels would look to dump the shares according to investors.

 

London’s FTSE 100 index will lose its second-largest company in terms of market capitalization if shareholders approve BHP Group’s plans to end its dual listing. Its decision would reduce significantly London’s exposure to the mining sector. In spite of BHP Group’s decision the London Stock Exchange would still be attractive to companies.

 

BHP Group wants to make Australia its primary stock market. The Melbourne-based company is the biggest company by market capitalization on the Australian stock exchange.

 

Britain’s departure from the EU created pressures on British stocks. A weak pound and a lack of tech stocks also affected the situation. Furthermore, London-listed shares are trading at 12.6 times forward earnings, which compares to 17.3 times for the Australian benchmark.

 

The company’s shareholders are expected to vote on the unification at meetings in the first half of 2022. Importantly, if the plan gets board as well as shareholder approval, the London Stock Exchange will lose the main player. The company has 128 billion pounds ($176.22 billion) in market capitalization second only to AstraZeneca with around 131 billion pounds.

 

In 2020, Uniliver, which like BHP had a dual-listing, merged its Dutch and British corporate entities. As a result, Unilever NV’s Amsterdam-listed shares ceased trading.

 

BHP Group and interesting details

It agreed to hive off petroleum business to Woodside Petroleum in a nil-premium merger, in return for new Woodside shares which will go to the shareholders of BHP Group. They will own 48% of the enlarged group.

 

The deal will make the Perth-based company a top 10 global independent oil and gas producer. It will control oil assets in the Gulf of Mexico, gas in Trinidad and Tobago. The Perth-based company will be in charge of aging assets in Australia’s Bass Strait. Woodside Petroleum will also double its stake in North West Shelf LNG.

The deal raised concerns about the strategic sense of expanding in oil. The company will be responsible for taking care of aging gas assets.

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