BHP Billiton Limited Off-Market Buy-Back

BHP BILLITON ANNOUNCES AN

OFF-MARKET BUY-BACK OF BHP BILLITON LIMITED SHARES

BHP Billiton today announced an off-market tender buy-back (Off-Market Buy-Back) of BHP Billiton Limited shares that will form an important part of its expanded US$10 billion capital management program. The on-market buy-back of BHP Billiton Plc shares that was reactivated in November 2010 will continue, including over the period of the Off-Market Buy-Back process. Subject to market conditions, it is BHP Billiton's expectation that the US$10 billion capital management initiative will be largely completed by the end of the 2011 calendar year.

The Off-Market Buy-Back of BHP Billiton Limited shares with a target size of A$5 billion will commence immediately in accordance with the timetable set out below. BHP Billiton Limited may, at its discretion, vary the size of the Off-Market Buy-Back.

The announcement continues BHP Billiton's strong track record of returning excess capital to shareholders. On completion of the US$10 billion capital management initiative, BHP Billiton will have repurchased a cumulative US$23 billion of BHP Billiton Limited and BHP Billiton Plc shares since 2004, representing 15 per cent of then issued capital([1]).

BHP Billiton Group Executive and Chief Financial Officer, Alex Vanselow, said "The decision to expand our capital management initiative, including the activation of an off-market buy-back of BHP Billiton Limited shares, is entirely consistent with our commitment to maintain an appropriate capital structure while we continue to make substantial investments in our growth projects. The company's particularly strong balance sheet affords BHP Billiton substantial flexibility as it continues with significant investment in organic growth that is expected to exceed US$80 billion over the five years to the end of the 2015 financial year."

Undertaking both an off-market and on-market buy-back, coupled with an increased interim dividend allows the entire BHP Billiton global shareholder base to participate, both directly and indirectly, in the capital management initiative. An off-market buy-back provides an efficient means of generating economic value for all BHP Billiton shareholders. While the precise impact of the Off-Market Buy-Back cannot be determined, it is expected to have a lasting and positive impact on BHP Billiton's earnings per share, cash flow per share and return on equity. As a result, all BHP Billiton shareholders, including those not participating in the Off-Market Buy-Back process, regardless of location and tax status, are expected to benefit from the Off-Market Buy-Back. The Off-Market Buy-Back will enable the purchase of BHP Billiton Limited shares at a material discount to the prevailing market price of BHP Billiton Limited and can be completed in a shorter period of time than on-market buy-backs of a comparable size.

The target Off-Market Buy-Back size of A$5 billion will enable BHP Billiton to continue to pay fully franked dividends under its progressive dividend policy. The Off-Market Buy-Back is expected to be funded from BHP Billiton's cash resources.

Details of the Off-Market Buy-Back

BHP Billiton Limited will repurchase shares under the Off-Market Buy-Back at a discount of at least 10 per cent to the volume weighted average price of BHP Billiton Limited shares over the five trading days up to and including the closing date of the Off-Market Buy-Back ("Market Price"). Eligible shareholders of BHP Billiton Limited may tender some or all of their shares at discounts of between 10 per cent and 14 per cent inclusive (at 1 per cent intervals) to the Market Price or as a final price tender (which is simply an election to receive the final buy-back price). The final buy-back price will be determined according to the tenders lodged by eligible shareholders and the Market Price.

Eligible shareholders may choose to participate in the Off-Market Buy-Back for various reasons and in so doing may take account of the tax benefits that only arise under the Australian taxation regime. BHP Billiton does not anticipate that shareholders who are resident outside Australia will participate, as they are likely to obtain a better outcome by selling their shares on-market. Excluded foreign persons, including shareholders in the US, US persons and residents of Canada will not be eligible to participate in the Off-Market Buy-Back. ADRs and restricted employee shares may not be tendered into the Off-Market Buy-Back.

For Australian tax purposes, the final buy-back price received by participating shareholders will comprise the following:

a) a capital component of A$0.28 per share; and

b) a fully franked deemed dividend equal to the final buy-back price less A$0.28 per share.

For the purpose of capital gains tax calculations, the capital proceeds will be the A$0.28 capital component plus an amount equal to the excess of the Tax Value([2]) over the final buy-back price.

Under the Off-Market Buy-Back tender process, BHP Billiton Limited will buy all shares tendered by eligible shareholders who elect to receive the final buy-back price or who tender their shares at a discount greater than or equal to the final buy-back discount determined under the tender process, subject to any required scale back. The operation of the scale back has been structured to ensure that eligible registered shareholders with small holdings are not disadvantaged. All shares that are accepted by BHP Billiton Limited will be bought back at the final buy-back price, even if they are tendered at a discount that represents a price below the final buy-back price.

BHP Billiton Limited will not buy back any shares tendered by shareholders at a price above the final buy-back price.

Although the target size of the Off-Market Buy-Back is A$5 billion, BHP Billiton Limited may, at its discretion, vary the size of the Off-Market Buy-Back. BHP Billiton Limited also retains the discretion to repurchase a lesser amount of shares than indicated or no shares at all.

Eligible shareholders will be sent the Off-Market Buy-Back booklet containing the terms and conditions of the Off-Market Buy-Back by 16 March 2011. The booklet cannot be sent into the United States or Canada. 

Off-Market Buy-Back Timetable([3]) 

The indicative timetable for the Off-Market Buy-Back is outlined below.

Shareholder Enquires

Shareholders who have any enquiries in relation to the Off-Market Buy-Back may contact BHP Billiton's buy-back enquiry line on 1300 612 584 within Australia, 0800 451 521 within New Zealandor +61 3 9415 4868 if you are calling from outside Australia or New Zealand, or visit our website (www.bhpbilliton.com).

Shareholders should seek their own professional advice (including tax advice) about the implications of participating in the Off-Market Buy-Back in their own individual circumstances.

Important notice:

Not for distribution or release in or into the United States or Canada.

This press release does not constitute, or form part of, any offer or invitation to sell, or any solicitation of any offer to purchase any securities in any jurisdiction, nor shall it or the fact of its distribution be relied on in connection with any contract thereof. No indications of interest in the Off-Market Buy-Back are sought by this press release, which relates to the BHP Billiton capital management program. Shareholders who are (or nominees who hold BHP Billiton Limited shares on behalf of or for the account of persons who are) in the United States or US persons, (within the meaning of Regulation S under the United States Securities Act of 1933) residents of Canada or who are otherwise excluded foreign persons will not be eligible to participate in the Off-Market Buy-Back described in this press release. ADRs and restricted employee shares may not be tendered into the Off-Market Buy-Back. Off-Market Buy-Back documents, including the booklet describing the terms of the Off-Market Buy-Back and tender forms, when issued, will not be distributed or sent into the United States or Canada.