BHP - BHP Group

[finicky]

At least us holders get the WPL shares franked and treated as a dividend. Not familiar with that but sounds ok. BHP is a permanent hold for me - too hard to work out the cost base after all its historical morphings.

From yesterday
"The new Woodside shares will be distributed to BHP shareholders as an in-specie fully franked
dividend."

 

[KevinBB]

"The new Woodside shares will be distributed to BHP shareholders as an in-specie fully franked
dividend."

I can't seem to find any documents relating to the tax consequences of the demerger, apart from the above that appears in one of the news releases. Has anyone seen a draft tax document, of the kind when companies are considering demergers?

If the WPL shares are distributed to BHP shareholders as a fully franked dividend, meaning that the dividend will be taxable in FY 2022, does that mean that these WPL shares will have a tax cost base of zero, so when they are sold, the full amount of the sale price will be taxable as a capital gain (for an investor) or as trading income (for a trader)?

KH

 

[Dona Ferentes]

At least us holders get the WPL shares franked and treated as a dividend. Not familiar with that but sounds ok. BHP is a permanent hold for me - too hard to work out the cost base after all its historical morphing...

Yeah, I saw that and am confused, as well. I guess your approach is as sensible as any (and similar to mine).

I hold BHP directly in my own name and took part in the buyback last FY .... I was scratching my head hoe to do it. My SMSF accountant stepped up to the plate and took information and delivered an outcome where it looked schmick. I have owned BHP since before 1985 so some were CGT-free, then the Bonus issues, took up rights and also was in DRPs early on, plus of course there was BHP Gold, OneSteel, BlueScope, the Billiton adjustment, etc. It was a mess. She did a great job. "It's my job", she said. ?‍?

And I still own a whole bunch, she has the spreadsheet for later, and I will not get too fussed. Whether I will continue to hold the WPL exposure down the line remains to be seen.

 

[finicky]

The tax man is the only creditor who demands that you work out how much you owe him (over a span of utter furmoil) and can penalize you if you get it wrong. Just send me a bill.

 

[Sharkman]

The tax man is the only creditor who demands that you work out how much you owe him (over a span of utter furmoil) and can penalize you if you get it wrong. Just send me a bill.

honestly i prefer it this way. even if they worked it out and sent me the bill, i would still do all the calculations myself anyway, just to check that they aren't pulling a sneaky one. i wouldn't trust them to get it right, this sort of thing can and does happen.

as someone who takes a cynical view of the tax office in general, if they calculated it for us i wouldn't be surprised if they "accidentally" get it wrong here and there (in their favour, naturally) just to see who's been paying attention to the rules and who hasn't.

you just can't trust the government to get this sort of thing right in my view. robodebt anyone?

 

[Sharkman]

I can't seem to find any documents relating to the tax consequences of the demerger, apart from the above that appears in one of the news releases. Has anyone seen a draft tax document, of the kind when companies are considering demergers?

If the WPL shares are distributed to BHP shareholders as a fully franked dividend, meaning that the dividend will be taxable in FY 2022, does that mean that these WPL shares will have a tax cost base of zero, so when they are sold, the full amount of the sale price will be taxable as a capital gain (for an investor) or as trading income (for a trader)?

KH

i don't really know either, but it might end up being something similar to the recent WOW/EDV demerger, where they allocated a multiplier to the WOW component (85.81%) and the EDV component (14.19%), and each investor then works out their own cost bases accordingly.

eg. if the investor originally bought 1000 WOW at $10, they then end up with 1000 WOW at a cost base of $8.581 and 1000 EDV at a cost base of $1.419 post the demerger.

i don't think it makes a lot of sense for one entity to retain its full cost base whilst the other ends up with a cost base of zero, that could distort the market as there will likely be fewer sellers of the zero cost base entity - people will be hesitant to incur such a tax hit. but i could be wrong, i guess we have to wait until the class ruling is released.

 

[KevinBB]

Hi @Sharkman

I think the BHP one is different, in that the WOW / EDV situation was a straight demerger. The original WOW cost base was divided into two portions in the ratio you outlined.

From what I've read, the BHP cost base won't be re-allocated. Again, as always, I could be proven wrong on this, so we need to see documents. It appears that WPL will be issuing its own shares to BHP in consideration for the transfer of BHP Petroleum from BHP to WPL, and then BHP will be passing those same shares to BHP shareholders as a fully franked dividend, i.e. BHP will pay the dividend, but instead of receiving cash, the shareholder will receive WPL shares.

This also means, as @mullokintyre pointed out a few posts ago, it seems now that there won't be a BHP buy back this year, probably because of the drain this dividend will have on franking credits

That's why I would love to look at the appropriate tax documents to find out exactly what will happen. In cases such as this the company will apply to the ATO for a draft ruling on how the transaction is to be treated tax wise for its shareholders. Its the same process WOW went through for its demerger.

Can't wait to see this document (I'm a tax nerd).

KH

 

[DrBourse]

Hi rabbithop,
There are 8 Resistance Lines above the current SP of $38.03, those levels are Gap Minor & Major Lines (pages 202 to 213) that are all pretty close to the traditional Sup & Res Lines, so any uptrend towards $50.00+ will be a slow process IMO.

There have been 53 Red Candles in the past 86 days since the last High of $54.55 on 30/7/21, that’s not a very good ratio.

ST Ind’s are falling to near their centrelines, and LT Ind’s are nearly all below their centrelines. And the Linear Regression is still in a pretty nasty Downtrend.

There are numerous ST Divergences (pages 45, 109 & 177) on BHP – my chart shows just 2 of them.

Even though BHP has found minor support @ $35.80, there are a lot of TA Negatives atm, So IMO the next stop will be down to the Support Level of $33.80, then maybe, closer to your call.

Cheers,
DrB

 

[Ann]

Just for fun, I am putting up a couple of charts, the first one is the current BHP chart which is displaying a very rare "three peaks and domed house" pattern.
I first saw this pattern back in 2006, sadly I lost those charts in a computer crash. The second chart is the chart for the DAX I put up here in Dec 2018 which I did a count as described by Bulkowski pattern site which also displays the "three peaks domed house". I am wondering if this pattern, given its rarity is really a harbinger of a major crash. I guess give it a few months to just over a year we may find out!

...and the DAX from back in December 2018

 

[Value Collector]

i don't really know either, but it might end up being something similar to the recent WOW/EDV demerger, where they allocated a multiplier to the WOW component (85.81%) and the EDV component (14.19%), and each investor then works out their own cost bases accordingly.

eg. if the investor originally bought 1000 WOW at $10, they then end up with 1000 WOW at a cost base of $8.581 and 1000 EDV at a cost base of $1.419 post the demerger.

i don't think it makes a lot of sense for one entity to retain its full cost base whilst the other ends up with a cost base of zero, that could distort the market as there will likely be fewer sellers of the zero cost base entity - people will be hesitant to incur such a tax hit. but i could be wrong, i guess we have to wait until the class ruling is released.

Do you know what date the shares are likely to be split? and hence when it will affect options pricing.

From what I can see I think it might be the 1st of July 2020, so shouldn't affect the June options contracts of BHP or woodside.

But if you are anyone else has seen anything hinting at the likely date of the actual split and share issue it would be great.

 

[KevinBB]

Do you know what date the shares are likely to be split? and hence when it will affect options pricing.

From what I can see I think it might be the 1st of July 2020, so shouldn't affect the June options contracts of BHP or woodside.

But if you are anyone else has seen anything hinting at the likely date of the actual split and share issue it would be great.

umm.. I'm not sure that there will be a split of BHP shares. My reading is that BHP will pay quite a hefty dividend, and that payment may affect your options pricing.

The original news release by BHP on 22 November 2021 quotes some dates, including one date of 1 July 2021. However I don't know if this is correct because the same document also talks about conditions precedent for the BHP / Woodside merger being satisfied by 30 June 2022.

KH

 

[Rabbithop]

Hi rabbithop,
There are 8 Resistance Lines above the current SP of $38.03, those levels are Gap Minor & Major Lines (pages 202 to 213) that are all pretty close to the traditional Sup & Res Lines, so any uptrend towards $50.00+ will be a slow process IMO.

There have been 53 Red Candles in the past 86 days since the last High of $54.55 on 30/7/21, that’s not a very good ratio.

ST Ind’s are falling to near their centrelines, and LT Ind’s are nearly all below their centrelines. And the Linear Regression is still in a pretty nasty Downtrend.

There are numerous ST Divergences (pages 45, 109 & 177) on BHP – my chart shows just 2 of them.

Even though BHP has found minor support @ $35.80, there are a lot of TA Negatives atm, So IMO the next stop will be down to the Support Level of $33.80, then maybe, closer to your call.

View attachment 133491

Cheers,
DrB

Thank u for the reply, just saw it now. Still trying to navigate around this Forum. Will bear in mind for the new week.

 

[Value Collector]

umm.. I'm not sure that there will be a split of BHP shares. My reading is that BHP will pay quite a hefty dividend, and that payment may affect your options pricing.

The original news release by BHP on 22 November 2021 quotes some dates, including one date of 1 July 2021. However I don't know if this is correct because the same document also talks about conditions precedent for the BHP / Woodside merger being satisfied by 30 June 2022.

KH

What I mean is existing BHP share holders are going to be given shares in Woodside, This should in theory reduce the value of the exisiting BHP shares by the amount of the WPL shares received.

This will affect of options strike prices, because they get adjusted when big capital transfers happen, So I was just interested to know the date that this split will be happening.

 

[Sharkman]

Do you know what date the shares are likely to be split? and hence when it will affect options pricing.

From what I can see I think it might be the 1st of July 2020, so shouldn't affect the June options contracts of BHP or woodside.

But if you are anyone else has seen anything hinting at the likely date of the actual split and share issue it would be great.

that was my understanding as well, that it would take effect on 1 Jul 2022 as per the public announcements made so far. presumably on that day the strikes of all active option chains will get adjusted. but i don't think the effective date is set in stone just yet.

 

[mullokintyre]

BHP has announced it will get rid of the stupid listing setup and have one listing on the ASX.
From The OZ

The BHP board has approved the collapse of the company’s dual structure, with the mining giant to become one entity listed on the ASX in 2022.
The dual company structure — comprising BHP Group Limited and BHP Group Plc — was formed at the time of the mining outfit’s merger with Billiton in 2001.

The unification was first flagged in August after a significant reduction in the contribution to the group from the assets owned by the British entity, and because a single company structure would result in substantial savings.

The unwinding of another disastrous foray by the BHP board at the time.
Mick

 

[divs4ever]

from what i understand though the winding down of the UK entity will make BHP less complicated for a take-over bid and for 'an incredible shrinking company ' ( has already spun-off S32 , the US onshore assets , now the oil and gas assets to WPL ) one might wonder is they a business/consortium with very deep pockets

after the WPL divestment one might expect the BHP share price to at least drop below $30

( i hold BHP and WPL )

 

[KevinBB]

BHP has announced it will get rid of the stupid listing setup and have one listing on the ASX.
From The OZ

The unwinding of another disastrous foray by the BHP board at the time.
Mick

I'm just going from memory here, but the dual listing was adopted to appease shareholders, and also national governments, when BHP and Billiton merged many years ago.

Certainly, BHP's board have made some really bad decisions over time, but I don't think the merger with Billiton was one of them.

KH

 

[Value Collector]

I'm just going from memory here, but the dual listing was adopted to appease shareholders, and also national governments, when BHP and Billiton merged many years ago.

Certainly, BHP's board have made some really bad decisions over time, but I don't think the merger with Billiton was one of them.

KH

Honest question here, but does bhp still own any of the assets we got in the Billiton merger? Didn’t most of them get spun out again when they created south32.

I remember when they had the competition to name the new company that became south32, a lot of commentators were saying they should just call it Billiton, because that was pretty much what it was.

if they ended up giving away the Billiton assets because they were Non-core/weaker, but were stuck with the expense dual listing, I can’t see how it wasn’t a mistake

 

[divs4ever]

I'm just going from memory here, but the dual listing was adopted to appease shareholders, and also national governments, when BHP and Billiton merged many years ago.

Certainly, BHP's board have made some really bad decisions over time, but I don't think the merger with Billiton was one of them.

KH

the Billiton merger was before i was interested in shares ( but i did see the odd headline about it )

i have heard both sides of the dual company structure argument

basically it made take-over attempt ( of BHP ) difficult , but at the same time kept administration costs up ( but MQG/MBL seems to cope OK with a US listing as well )

but i have to agree that BHP has had some misadventures along the way , including the JV with Vale ,

 

[divs4ever]

Honest question here, but does bhp still own any of the assets we got in the Billiton merger? Didn’t most of them get spun out again when they created south32.

I remember when they had the competition to name the new company that became south32, a lot of commentators were saying they should just call it Billiton, because that was pretty much what it was.

from my ( limited ) understanding S32 was more than the lion's share of Billiton assets , it added a few minor BHP assets , and the UK BHP was the second largest market cap. on the UK bourse , now i don't remember Billiton having any oil/gas assets , but had coal assets at one stage .

i can't answer your question but suspect BHP might still have some Billiton assets , i keep thinking Billiton was Africa-centric but i suspect i am wrong there ( surely BHP would have bought more than that .... but after those US shale assets .... )