BHP Billiton plc (ADR) (NYSE:BBL) recently announced that it would be spinning off assets into a new global metal and mining company. Glencore PLC (LON:GLEN) on the other hand has been off late an acquirer of assets. Both these companies were expected to announce payouts to investors, but BHP Billiton plc (ADR) (NYSE:BBL) disappointed its investors on that front. Nik Stanojevic, Equity Analyst at Brewin Dolphin discussed the difference between BHP Billiton plc (ADR) (NYSE:BBL) and Glencore PLC (LON:GLEN) on CNBC, recently.
“From a risk perspective, they are a completely different proposition to each other. BHP Billiton plc (ADR) (NYSE:BBL) has net debt EBITDA under 1 times, targets a single A credit rating and clearly a low geopolitical risk. The spin-off is going to make it a pretty much OECD-only miner, huge resource in big resource basin. Glencore PLC (LON:GLEN) is an acquirer of assets. It’s a BBB credit, much higher debt, much higher leverage, it’s a bet on management skills on M&A. It has a better execution in M&A, which it has done very well in the past. So, these are two completely different risk propositions,” Stanojevic said.
Stanojevic also revealed that Glencore PLC (LON:GLEN) recently sold one of its prominent mines for $6.5 billion and out of those proceeds is returning only $1 billion to the investors because the company has very high debt level. Stanojevic feels that Glencore PLC (LON:GLEN) hasn’t done anything exceptional by returning $1 billion to investors as its a small share of what it received by selling one of its major assets. BHP Billiton plc (ADR) (NYSE:BBL)’s decision to spin-off some of its assets is a surprise move from nay as the company itself was earlier seen as an acquirer of assets and had a tremendous growth on the back of China’s huge demand for commodities.