BHP Billiton signals $1.1bn share buy-back as commodity prices soar

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The Independent Online

BHP Billiton, the world's largest diversified miner, is to return up to $1.1bn (£600,000) to Australian shareholders and it is still considering the best way to return nearly $1bn more to investors elsewhere.

BHP Billiton, the world's largest diversified miner, is to return up to $1.1bn (£600,000) to Australian shareholders and it is still considering the best way to return nearly $1bn more to investors elsewhere.

The company announced earlier this year that it would hand back $2bn to shareholders, after a stellar performance on the back of soaring commodity prices. As part of that "capital management" programme, the company, listed in both Australia and London, announced yesterday that it would carry out a share buy-back worth between $700m and $1.1bn.

A tax break available to Australian investors means that the company can buy their shares at a discount to the market price, while the shareholders will actually end up getting an above market price - taking the tax benefits into account.

BHP Billiton's chairman, Don Argus, said: "Having regard to all of the options, we believe that this will be the most value-enhancing way of returning capital given the diverse nature of our shareholder register and, combined with our ongoing progressive dividend policy, will provide the optimal strategy for maximising economic value across our entire shareholder base."

The buy-back - which affects shareholders in BHP Billiton Ltd rather than BHP Billiton plc - reduces the company's equity capital by about 1.5 per cent.

Nick Hatch, an analyst at Investec Securities, said: "This appears to be the most efficient way to return the initial tranche of the capital management programme proceeds to shareholders. While not directly involved, plc shareholders benefit from per share value enhancement and from the buy-back at a discount rather than at market or at a premium."

The company is still considering how to return the rest of the $2bn promised to shareholders earlier this year. It will be done through either a share buy-back or a special dividend.

The money is coming back to investors because BHP Billiton has found itself with surplus cash on its books, despite raising its normal dividend by 27 per cent this year and committing itself to a $4bn investment programme. Shares in the group rose more than 2 per cent in London yesterday to close at 598p.

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