BHP shareholders okay merger

Shareholders of Australia’s BHP (BHP-N) voted in favour of a proposed US$32-billion merger with Billiton to create the world’s largest diversified resources company.

BHP says 88.2% of the 835.4 million votes cast were in favour of the deal.

Before the vote, BHP CEO Paul Anderson told shareholders that the deal would deliver a global spread of operations and markets in the three key resource regions of Australia, South Africa, and South America, while diversifying operations into aluminum, thermal coal, nickel and mineral sands.

Billiton shareholders approved the deal on Tuesday with a majority of 91.5% of the votes cast. More than half of the company’s shares were represented at the vote.

Some opposition was expressed to executive payments of 14.2 million shares (worth about US$72 million), which are tied to the merger. Originally, the payments would have only been made in the case of a takeover, or if certain performance targets had been met. Billiton CEO Brian Gilbertson stands to receive 1.44 million share options (worth more than US7.1 million).

The deal saw more scrutiny in Australia, where BHP shareholders called into question the disclosure of financial information about the merger and the fact that BHP would hold only a 58% stake in the new group. Some valuations placed BHP’s stake at up to 65%.

Shareholders were also worried that BHP-Billiton would become rooted in Britain and lose its Australian identity. They have been assured that the new company would keep its headquarters in Melbourne and maintain a corporate management centre in London.

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

Under the deal, existing BHP shareholders would receive a bonus of 1.06 shares for each share held. This would even out the economic and voting rights between themselves and Billiton shareholders.

Paul Anderson, chief executive officer of BHP, would carry on in that capacity until 2002, when Brian Gilbertson would take the helm.

The merger is subject to regulatory approval.