BHP spinoff South32 to launch in mid-2015

BHP Billiton’s (LSE: BLT) spinoff company will be named South32, a nod to the location of its assets  in the southern hemisphere and a more cryptic salute to the location of its main offices in Australia and South Africa.

The new company’s head office will be in Perth, with a regional head office and global shared services in Johannesburg. These two centres, which will support operations in five countries, are both located on the 32nd parallel south.

“Our heritage and the places in which we operate are an important part of our identity,” South32 CEO-elect Graham Kerr said in a release. “While South32 is grounded in the southern hemisphere, we will retain our global reach and ambition as we seek to exceed the expectations of a global shareholder base.”

Seeking to simplify its portfolio and focus on its “four pillars” of iron ore, copper, coal and petroleum (with room for a potential fifth in potash), BHP first announced the spinoff or “demerger” in August.

Of BHP’s 41 assets, 22 will find a new home in South32, including aluminum, manganese and silver operations.

While the 19 assets that BHP is keeping accounted for 96% of its underlying earnings before interest and taxes in fiscal 2014, the mining giant says the South32 operations are also of high quality.

“Many of our assets are among the most attractive in their respective commodities and all have benefitted from BHP Billiton’s structured approach to improving safety and performance,” Kerr said.

“As we move to a regional model and develop a fit-for-purpose strategy, we have the potential to further improve performance. This would enable South32’s assets to reach their full potential and benefit our shareholders, employees and communities.”

South32 will hold BHP’s integrated aluminum business, including assets in South Africa and the Alumar mine in Brazil; BHP’s integrated manganese business, including assets in South Africa and Australia; the Cannington silver mine and Illawarra metallurgical coal assets in Australia; and the Cerro Matoso nickel mine in Colombia.

Most of the spun-out assests were acquired in 2001, when Melbourne-based BHP and London-based Billiton merged.

The transaction is on track to be completed in the first half of 2015, with several third-party approvals — including the Australian Foreign Investment Review Board — in hand.

Once all third-party approvals have been received, BHP’s board will give the transaction final approval. The company expects to release further details of the demerger and shareholder documentation in March, with a shareholder vote slated for May.

In addition to Graham Kerr, who was BHP’s chief financial officer before being tapped for CEO of South32, several other executive appointments have been announced.

Chief financial officer-elect Brendan Harris; president and chief operating officer-elect Australia Ricus Grimbeek; and president and chief operating officer-elect Africa Mike Fraser have all been hired from within BHP.