Merger prompts BHP Steel spin-off

SYDNEY, Australia (CNN) -- Australian resources giant BHP will spin-off its steel flat products business to shareholders as part of its $28 billion merger with Billiton.

BHP managing director Paul Anderson said on Monday the move would create a stand-alone company focused solely on steel flat products.

He said completion of the spin-off would be no later than the end of 2002

Anderson said that the merger with London-based metals group Billiton, announced on Monday, would mean a further reweighting of BHP's asset base towards minerals and petroleum.

"This is an appropriate time to announce the spin-out of BHP Steel to BHP shareholders, to maximise the on-going opportunities for prosperity of that business," Anderson said

He said the move would ensure BHP Steel's long-term global competitiveness in a way that would not have been possible if it remained part of the BHP portfolio.

Because of the changes flowing from the planned merger, BHP Steel would have accounted for only 5 percent of the projected earnings for a combined BHP Billiton.

Annual steel sales of $2.5 billion

BHP Steel has annual sales of about $2.5 billion and assets of about $1.75 billion.

BHP has already spun-off its long products business, though the creation of OneSteel last October. This followed a review of its steel businesses which led to the decision in 1999 to separate the long products and flat products.

BHP says a spin-off to shareholders for the flat products business is its preferred divestment option because this would create the greatest value for shareholders. But it said it would also consider options, including a trade sale or a stock exchange float via an initial public offering of BHP Steel shares.

BHP reported a record half-year net profit last month of more than $700 million for the six months to December 2000, with petroleum and minerals the main drivers of the improved performance. Exchange rate movements also helped the result.

Anderson said then that the company was "outward-looking and opportunity-focused" and had the necessary balance sheet strength to make the most of development opportunities.

BHP Steel
BHP
OneSteel
Billiton

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