By Peter Ker


BHP’s plan to unify its corporate structure has won support from funds management consolidator Wilson Asset Management (WAM), with the acquisitive firm expressing confidence that pre-positioning by investors will soften the shock that BHP’s unification will have on Australia’s flagship market indices.

BHP shareholders will next week vote on a plan for the Australian side of BHP’s dual-listed company structure to acquire the British side through a one-for-one issue of shares in BHP’s Australian-listed company.

Fund managers including Pendal Group and Ausbil this week vowed to vote against unification on the grounds the one-for-one mechanism undervalued the premium that BHP’s Australian shares have traditionally enjoyed over BHP’s London shares, meaning the cost of the $US450 million process outweighed the benefits.

But WAM portfolio manager Matt Haupt said his firm – which has spent the past year acquiring smaller listed investment companies – would vote in favour of unification at the January 20 meeting of BHP shareholders.

“We are very much in favour. I think the [dual-listed company] structure was outdated and unification makes sense in the long run for everyone,” he said on Thursday.

“A lot of the risk was borne on the Aussie shareholders, so I get why some people have a bit of a bitter taste, but I think in the medium to long term it makes sense and I think it is a great thing to happen.”

The plan to unify was announced in August and BHP’s Australian shares have underperformed the British shares ever since as investors realised the premium enjoyed by the Australian stock – which blew out to 40 per cent in March 2020 – would evaporate under the deal.

BHP’s weighting in the benchmark S&P/ASX200 index will rise to about 10 per cent on January 31, from about 6.2 per cent now, if shareholders approve the unification, prompting index manager S&P Global to warn of material volatility in trading volumes as mandated investors adjust to the super-sizing of BHP.

Mr Haupt said he expected some investors would “pre-position” their holdings to suit BHP’s bigger share of the index before January 31, but the impact of mandates on passive funds was unclear.

Mr Haupt said a mandate requiring investors to be no more than 5 per cent underweight on certain large stocks was common in the Australian market and had triggered an extended rally in CSL shares when the stock breached $300 for the first time in early 2020.

“We saw CSL go on a massive run as it was breaching everyone’s 5 per cent maximum underweight limits, so you can imagine that will kick in for BHP too,” he said.

“Our base case is that pre-positioning will happen, but there will still be an element on the day which we just don’t know about at this point in time.”

Mr Haupt said WAM did not have any mandates that would compel it to buy BHP on January 31 and was already overweight the stock.

UniSuper and K2 Asset Management have indicated they plan to vote in favour of unification.

Major proxy advisers like ISS Governance and CGI Glass Lewis have encouraged clients to vote in favour of unification.

BHP needs 75 per cent of shares in both its Australian and London listed stocks to vote in favour for unification to proceed.

The vote is the first of two big transactions for BHP in 2022, with the company also hoping to demerge its petroleum division to Woodside.

BHP has said the Woodside demerger can still go ahead if unification fails, but it will be structurally easier to execute if the company is unified first.


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