BHP Billiton Spin Off to be Named South32

Major miner BHP Billiton (ASX:BHP,NYSE:BHP,LSE:BLT) said Monday morning that it has chosen a name for the company it plans to create through its proposed demerger: South32. 

The reasoning behind the name is simple: most of the assets to be spun off into South32 are in the southern hemisphere, and Australia and South Africa, its two regional centers, are “linked by the thirty-second parallel south line of latitude.” As the company states in a release, the name “represents this footprint and its regional approach to managing its operations.”

That said, don’t expect South32 to remain confined to the south. As CEO Graham Kerr said, “[w]hile 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.” Indeed, reflecting that global focus, the company will have a primary listing on the ASX, a secondary listing on the JSE and a standard listing in London. Its head office will be located in Perth, while it will have a regional head office in Johannesburg.

Demerger on track

Announced back in August, BHP’s demerger will see its aluminum and manganese businesses, along with its Australian metallurgical coal assets and South African thermal coal operations, be pushed into South32. They’ll be joined by individual assets such as the Colombia-based Cerro Matoso nickel project and Cannington zinc–lead–silver mine.

BHP itself will stay concentrated on the “four pillars” of of iron ore, copper, coal and petroleum, a move that’s been questioned lately given the poor performance of iron ore and oil versus “the surge in the value of some of the commodities that will be siphoned off into the new business.” However, Kerr’s recent statements to The Australian make it clear that he’s not worried.

“When we came out in August and spoke about the demerger, we were very clear that a lot of these actual commodities, if you looked at the general consensus for price forecasts and demand, was positive. You’re seeing that play out,” he said of the assets destined for South32. He added, “[p]eople will get very excited about iron ore, very excited about petroleum, but the reality is that our iron ore and petroleum businesses are still wonderful businesses. The demerger, when we split up the company, was designed on the gigantic size of some resources versus the others.”

The demerger is expected to be completed in the first half of 2015.

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article. 

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BHP to Say Goodbye to Businesses Worth US$16 Billion in Spin Off