15th Feb 2006 07:00
BHP Billiton PLC15 February 2006 Date 15 February 2006Number 04/06 BHP BILLITON ANNOUNCES A$1.5 BILLION OFF MARKET BUY-BACK OF BHP BILLITON LIMITED SHARES Today BHP Billiton announced that it will return US$2 billion to itsshareholders under a capital management programme to be completed within an 18month period. This programme continues BHP Billiton's outstanding track recordof delivering value to shareholders, and is in addition to the US 3 cents pershare increase in the interim dividend also announced today. The programme will commence immediately with an off-market buy-back of A$1.5billion (US$1.1 billion) of BHP Billiton Limited shares, with the balance beingreturned via on-market purchases, most likely of BHP Billiton Plc shares. Finaltiming and execution of the on-market program will be dependent on an ongoingassessment of market conditions. BHP Billiton's Chairman, Don Argus, said "the Board of BHP Billiton has anabsolute commitment to capital discipline, and our confidence in the Company'soutlook and strong cash generative capability has underpinned our decision tomake this sizable return. This is now the second consecutive year in which wewill have undertaken a $2 billion capital management initiative." "Given the Company's financial strength we are well positioned to fund ourUS$14.4 billion pipeline of projects and other value enhancing opportunities asthey arise, maintain BHP Billiton's robust capital structure and continue withour progressive dividend policy, as well as make this $2 billion return, in linewith our stated priorities for use of the Company's cash flow." Mr Argus said, "Undertaking both an off-market and on-market buy-back, coupledwith the significant increase in our interim dividend, also announced today,provides a variety of means for our entire global shareholder base toparticipate, both directly and indirectly, in this initiative. The largestcomponent, being the off-market buy-back, provides an optimal means formaximising economic value for all of our shareholders. All shareholders in BHPBilliton Limited and BHP Billiton Plc, including those not participating in thebuy-back process, regardless of location and tax status, benefit from anoff-market buy-back. Purchase of shares at a discount of at least 8% to themarket price allows us to buy back a greater number of shares than is possiblein an on-market buy-back for the same total cost. The value of the remainingshares will therefore be enhanced through the increased earnings, cash flow andreturn on equity attributable to each share." The capital management programme will be funded from cash and borrowings, mostlikely from the Company's existing commercial paper programmes. Given thestrength of BHP Billiton's financial position, it will remain stronglycapitalised after completion of the programme, and the capital return will notcompromise the Company's solid "A" credit rating or its ability to fund thestrong pipeline of organic growth projects. The Board of BHP Billiton has concluded that the proposed off-market buy-backcan be completed without negatively affecting the ability of BHP BillitonLimited to pay fully franked dividends for the foreseeable future. Off-market buy-back details BHP Billiton will not proceed with the off-market buy-back unless the discountat which the shares can be repurchased represents at least an 8% discount to thevolume weighted average price of BHP Billiton Limited shares over the 5 tradingdays up to and including the closing date of the buy-back ("Market Price").Eligible shareholders may choose to participate in the off-market buy-back forvarious reasons and in so doing may take account of the tax benefits that onlyarise under the Australian taxation regime. BHP Billiton does not anticipatethat shareholders who are resident outside Australia will participate, as theyare likely to obtain a better outcome by selling their shares on-market.Excluded foreign persons, including shareholders in the US, US persons andresidents of Canada will not be eligible to participate in the buy-back. ADRsand restricted employee shares may not be tendered into the buy-back. Eligible shareholders of BHP Billiton Limited may tender some or all of theirshares at discounts of between 8% and 14% inclusive (at 1% intervals) to theMarket Price, or as a final price tender (which is simply an election to receivethe final buy-back price). The final buy-back price will be determined accordingto the tenders lodged by eligible shareholders and the Market Price. For Australian tax purposes, the buy-back price received by participatingshareholders will comprise the following:(a) a capital component of A$2.10 per share; and (b) a fully franked deemed dividend equal to the buy-back price less A$2.10. For the purpose of Capital Gains Tax calculations, the capital proceeds will bethe A$2.10 capital component plus an amount equal to the excess of the Tax Value(1) over the buy-back price. Under the off-market process, BHP Billiton Limited will buy all shares tenderedby eligible shareholders who elect to receive the final buy-back price or whotender their shares at a discount greater than or equal to the final buy-backdiscount determined under the tender process, subject to any required scaleback. The operation of the scale back has been structured to ensure thatregistered shareholders with small holdings are not disadvantaged. All sharesthat are accepted by BHP Billiton Limited will be bought back at the finalbuy-back price, even if they are tendered at a discount that represents a pricebelow the final buy-back price. BHP Billiton Limited will not buy back any shares tendered by shareholders at aprice above the final buy-back price. Although the target buy-back size isaround A$1.5 billion (approximately US$1.1 billion), the Company maysignificantly increase the size of the buy-back if there is excess demand at anattractive price. Eligible shareholders will be sent the buy-back booklet containing the terms andconditions of the off-market buy-back by 8 March 2006. The booklet cannot besent into the United States or Canada. (1) Tax Value will be calculated pursuant to the ATO guidelines (detailed in TaxDetermination TD 2004/22) which effectively provide that the Tax Value will bethe 5-day VWAP of BHP Billiton Limited shares on the ASX up to and including 14February 2006 and will be adjusted for the movement in the BHP Billiton Plcshare price from the closing price on the London Stock Exchange on 14 February2006 to the opening price on the London Stock Exchange on the closing date ofthe Buy-Back (31 March 2006) Off-Market Buy-Back Timetable(2) The indicative timetable for the off-market buy-back is outlined below. Event Date Buy-back announcement 15 February 2006 Cut-off date for franking entitlement 16 February 2006under 45-day rule(3) Shares quoted ex-entitlement to participate 20 February 2006in the buy-back on the ASX (shares acquired on the ASX on or after this date will not typically confer an entitlement to participate in the buy-back) Determination of eligible shareholders entitled 24 February 2006to participate in the buy-back (record date) Completion of mail out of buy-back documents 8 March 2006to eligible shareholders Buy-back tender period opens 13 March 2006 Buy-back tender period closes - tenders must be 31 March 2006received by 7.00pm (AEST) Announcement of the buy-back price and any 3 April 2006scale back Buy-back proceeds dispatched/credited to No later than participating shareholders completed 10 April 2006 Shareholders who have any enquiries in relation to the off-market buy-back maycontact BHP Billiton's buy-back enquiry line on 1300 781 469 toll free withinAustralia or +61 3 9415 4254 if calling from outside Australia, or visit ourwebsite www.bhpbilliton.com. Shareholders should seek their own professionaladvice (including tax advice) about the implications of participating in thebuy-back in their own individual circumstances. Contacts:Australia United KingdomJane Belcher, Investor Relations Mark Lidiard, Investor & Media RelationsTel: +61 3 9609 3952 Mobile: +61 417 031 653 Tel: +44 20 7802 4156 Mobile: +44 7769 934 942email: [email protected] email: [email protected] Evans, Media Relations Ariane Gentil, Media RelationsTel: +61 3 9609 2898 Mobile: +61 400 693 915 Tel: +44 20 7802 4177 Mobile: +44 78 81 51 8715email: [email protected] email: [email protected] United States South AfricaTracey Whitehead, Investor & Media Relations Alison Gilbert, Investor RelationsTel: US +1 713 599 6100 or UK +44 20 7802 4031 Tel: SA +27 11 376 2121 or UK +44 20 7802 4183Mobile: +44 7917 648 093 email: [email protected]: [email protected] 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 invitationto sell, or any solicitation of any offer to purchase any securities in anyjurisdiction, nor shall it or the fact of its distribution be relied on inconnection with any contract therefor. No indications of interest in thebuy-back are sought by this press release, which relates to the BHP Billitoncapital management programme. Shareholders who are (or nominees who hold BHPBilliton Limited shares on behalf of or for the account of persons who are) inthe United States US persons, (within the meaning of Regulation S under theUnited States Securities Act 1933,) residents of Canada or who are otherwiseexcluded foreign persons will not be eligible to participate in the off-marketbuy-back described in this press release. ADRs and restricted employee sharesmay not be tendered into the buy-back. Buy-back documents, including the bookletdescribing the terms of the buy-back and tender forms, when issued, will not tobe distributed or sent into the United States or Canada. (2) While BHP Billiton does not anticipate any changes to these times and dates,it reserves the right to vary them without notification (3) Shares acquired after this date will generally not satisfy the 45-day rulefor the purposes ofcalculating an Australian taxpayer's tax credits. Background An off-market buy-back tender is a commonly adopted capital management mechanismemployed by Australian companies. In essence, it allows a company to buy backits shares from shareholders at a price which is less than the prevailing priceon the open market/stock exchange. In recent comparable Australian off-marketbuy-backs for example, the final buy-back price has been set at a discountwithin a range of approximately 9.2% to 15.6% to the market price at close ofthe buy-back. Australian companies have the opportunity to buy back shares at adiscount to market price because, among other things, the buy-back proceeds aretreated in a manner that has Australian tax outcomes which are valued by someAustralian resident shareholders. Under Australian taxation law, a portion of the buy-back price will be deemed tobe a dividend for Australian tax purposes. The deemed dividend portion of thebuy-back price will be "fully franked", which means that Australian taxresidents will be entitled to an income tax credit representing the Australiancorporate income tax that BHP Billiton Limited has paid in respect of theprofits from which the deemed dividend is derived. In the case of someAustralian shareholders, depending on the shareholder's marginal tax rate, thiscredit may be larger than the amount of tax which will be assessed on the deemeddividend. To qualify for the tax credits, shareholders must generally have held theirshares "at risk" for a minimum of 45 days prior to the date on which the Companydetermines the buy-back price and buy-back allocations. Under the BHP BillitonLimited off-market buy-back timetable, the 45-day rule cut off date is 16February 2006, as shares acquired after this date will not, under the timetable,be held at risk for 45 clear days. The ex-date for buy-back entitlements on the ASX is 20 February 2006. Sharesacquired on or after this date will not typically confer an entitlement toparticipate in the off-market buy-back. BHP Billiton has received advice fromthe ATO that shares purchased on or after the buy-back ex-date (20 February2006), on an ex-entitlement basis, will not be allocated on a Last In First Out(LIFO) basis for the purposes of the 45-day rule. Accordingly, if shareholderspurchase shares on or after the buy-back ex-date this should not, of itself,result in them failing the 45 day rule in respect of other shares sold into thebuy-back. In addition to the deemed dividend portion, the buy-back price will include acapital component of A$2.10 per share. For Australian tax purposes, the proceedsfrom selling the share will be taken to be the aggregate of A$2.10 per share,plus any excess of the Tax Value of each share over and above the buy-backprice. This may result in some Australian residents realising a capital losswhich can be used to offset that holder's other capital gains. An off-marketbuy-back however will have different tax consequences for each shareholderdepending on their residency for tax purposes, the price at which theyoriginally purchased their shares and their individual tax position.Shareholders should seek advice as to the taxation consequences of participatingin the buy-back in their own circumstances. BHP Billiton Limited ABN 49 004 028 077 BHP Billiton Plc Registration number 3196209Registered in Australia Registered in England and WalesRegistered Office: Level 27, 180 Lonsdale Street Melbourne Registered Office: Neathouse Place London SW1V 1BH UnitedVictoria 3000 KingdomTelephone +61 1300 554 757 Facsimile +61 3 9609 3015 Telephone +44 20 7802 4000 Facsimile +44 20 7802 4111 The BHP Billiton Group is headquartered in Australia This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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