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The Australian government has confirmed it would block any attempt by BHP Billiton to change its corporate structure and incorporate the company in the UK– a course of action sought by activist hedge fund Elliott Associates.
Scott Morrison, Australia’s treasurer, said on Wednesday any such move would be contrary to the national interest. He warned directors of the Anglo-Austrlian miners they could face criminal and civil action if they attempted to go ahead with such a plan.
“It is unthinkable that any Australian government could allow this original Big Australian to head offshore,” said Mr Morrison. “I am able to order that such an acquisition not occur if it is contrary to the national interest.”
Mr Morrison made the comments in an interview with Australia’s Herald Sun newspaper. They echo a statement made by Canberra last month, when it said any changes to the structure of the country’s biggest company would need to be consistent with the “national interest”.
His intervention comes as executives of Elliott Advisers flew into Sydney this week to talk to Australian-based shareholders in BHP. They are seeking to convince those investors to back a plan floated by the fund last month to change BHP’s corporate structure and press the miner to spin off its US oil and gas assets into a new company.
BHP has rubbished the Elliott plan, with its chief executive Andrew Mackenzie saying that it was little more than financial engineering with “inherent and obvious flaws”. However, some big shareholders want the company to consider de-merging its entire oil and gas business, including its Australian assets.
In the Herald Sun interview, Mr Morrison said BHP played an important role in the Australian economy and that the US hedge fund’s plans went against conditions laid down by Canberra in 2011 when BHP Limited and Billiton merged.
In total, Canberra set a list of eight specific conditions on the deal, a move that underlined the importance of the combined group to Australia and sought to ensure the company’s headquarters and senior executives would remain in the country.
BHP paid $2.5bn in tax and royalties to the federal government last year.
“These conditions apply indefinitely unless revoked or varied by me,” said Mr Morrison. “It is clear that the proposals under discussion would not be consistent with these conditions.”
Mr Morrison told the newspaper that if BHP’s management went ahead with Elliott’s proposals, it could be a criminal offence under the countries foreign takeover rules.
“If the company is convicted of an offence, the directors could be held personally liable,” he said.
In another blow to Elliott, ratings agency Moody’s said on Wednesday that its proposals to lift shareholder returns were “credit negative” for BHP.
Moody’s said its positive outlook on BHP was based on the miner continuing with its current policies and that its operating footprint would not change “materially as a result of the Elliott proposals.”
Shares in BHP fell 23.5p to £11.46.