Billiton, BHP to form mining behemoth

London-based Billiton and Australia’s BHP (bhp-n) are merging to form one of the world’s largest diversified resource companies, to be known as BHP-Billiton.

The merger is to take place under a “dual-listed” structure, meaning that both companies would retain their existing public listings but combine their management teams and finances. BHP-Billiton would effectively have about 6 billion shares outstanding and a market capitalization of US$28 billion.

Under the deal, existing BHP shareholders will receive a bonus of 1.06 shares for every share held so as to even-out the economic and voting rights between themselves and Billiton shareholders. Taking into account the planned spinoff of BHP’s steel assets plus a share buy-back plan, this translates into a 58% holding in the merged entity.

The unified board and management team will be based in Melbourne, Australia, with a secondary headquarters in London, England. Paul Anderson is currently chief executive officer of BHP, and he will carry on in that capacity until 2002, after which time Brian Gilbertson, currently CEO of Billiton, will take the helm.

Using 2000 financial results, BHP-Billiton has pro forma revenue of US$18.6 billion and attributable profits of US$2 billion. Cash flow, including dividends from joint ventures, tops US$4.6 billion, and the company’s assets are worth US$11.9 billion.

Billiton is among the world’s largest aluminum producers and is the leading producer of chrome and manganese ores and alloys. The major is also a world player in the production of thermal coal, nickel and titanium mineral sands.

Last year, Billiton beefed up its copper division by taking over Rio Algom for $1.7 billion. The takeover will see its copper production grow to 550,000 tonnes annually by 2005, reflecting the startup of the 33.75%-owned Antamina copper-zinc project in Peru and the wholly owned Spence copper project in Chile.

Such a portfolio complements BHP’s ranking as the world’s third-largest producer of iron ore, the largest exporter of metallurgical coal, and the fourth-largest producer of copper. BHP also owns a 51% stake in the Ekati diamond mine, in the Northwest Territories, and has considerable oil and gas assets across the globe.

Among BHP’s largest projects is Escondida in Chile, the world’s largest copper mine. Production there is being expanded, at a cost of US$1 billion, to 1.2 million tonnes from 920,000 tonnes copper in concentrate and cathode.

BHP holds a 57.5% stake in Escondida, with the remainder divided between Rio Tinto (rtp-n), with 30%, a consortium of Japanese companies, with 10%, and International Finance Corp., with 2.5%.

The merger is subject to the approval of regulators and BHP’s and Billiton’s shareholders. A break-up fee of US$100 million is payable by either BHP or Billiton, under certain conditions, if the merger fails.