BHP investor Tribeca calls for sale of U.S. shale assets, board shake-up

MELBOURNE/SYDNEY (Reuters) - A second BHP Billiton Ltd BHP.AXBHP.L shareholder has made a public push for changes at the world's largest miner, with Sydney-based Tribeca Investment Partners pressing the company to sell its U.S. shale assets and overhaul its board.

A sign adorns the building where mining company BHP Billiton has their office in Perth, Western Australia, November 19, 2015. REUTERS/David Gray/File photo

Tribeca, a boutique Australian hedge fund, joined calls by U.S. activist investor Elliott Management for an exit from shale to free up capital, saying BHP could reap $10 billion.

Elliott last month urged BHP to unlock value by scrapping its dual-corporate structure, spinning off its entire U.S. oil business, and boosting capital returns.

Tribeca, greeting Elliott’s debate as “great to see”, sent an eight-page letter to its investors on Thursday titled “Making BHP Great Again”. It called for a sale of shale assets, return of capital, and a board and management revamp.

“We fear elements of the existing path could leave the company susceptible to ongoing underperformance and may ultimately result in this once great global mining force being considerably diminished,” Tribeca said in the letter.

The fund, which says it has received “a lot of inbound comment” in support of its move, said it was not looking for “a quibbling debate”, but expected the miner known as the Big Australian to respond.

Tribeca’s Global Natural Resources Fund analyst James Eginton said on Friday the fund had spoken to BHP since releasing the letter and had lined up a meeting with the company in May. BHP is expected to address investors at an investment bank conference in Barcelona later this month.

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BHP has so far rejected Elliott’s plan. More broadly, the U.S. fund has received a generally tepid reaction from shareholders, and Australian Treasurer Scott Morrison said on Thursday he would not allow BHP to move its primary listing to London as Elliott had proposed.

Tribeca, which has about A$2.5 billion ($1.9 billion) in funds under management, has spoken to some major Australian shareholders about its ideas, and hoped to talk to Elliott next week. But a wide range of investors do not see BHP as a long-term holder of the shale assets, Eginton said.

BT Investment Management analyst Brenton Saunders agreed the assets did not fit with BHP’s portfolio - even if current oil prices make them tough to sell.

“I don’t think they’re particularly good at managing it. It’s a really sore point for a lot of people. But at the same time you don’t want them to give it away,” said Saunders, whose fund owns BHP shares.

BHP, which said last month it would pursue the sale of some, but not all, of its onshore U.S. oil and gas assets, had no immediate comment on Tribeca’s letter.

Tribeca also called for BHP to shake up its board in light of the planned retirement of long-serving Chairman Jac Nasser: a “critical opportunity to reset the culture” to focus on shareholder returns and capital efficiency.

Eginton also said Chief Executive Andrew Mackenzie should go.

“The problem with the current CEO is he’s an appointment of the current board,” he said.

Tribeca criticized the board for having overseen the destruction of $30 billion in shareholder capital in recent years with the shale acquisitions, failed deals, scrapped projects, and an investment in potash.

On energy, it called for BHP to position itself for long-term change by expanding in materials used in making batteries such as lithium, graphite and cobalt.

Tribeca declined to say how big a stake it has in BHP, but it holds both Australian and UK-listed shares. It is not among the top 20 shareholders, according to Thomson Reuters data.

Reporting by Jamie Freed and Sonali Paul; Editing by Richard Pullin and Susan Thomas