NEW YORK (The Deal) -- Shareholders of BHP Billiton (BHP) on Wednesday backed one of the mining sector's biggest ever spinoffs when they voted to create South32 Ltd., establishing a new global mining company that could be as much prey as predator.
While final votes were yet to be tallied, proxy votes at twin meetings in Perth, Australia, and London approved the demerger with majorities of 97.2% and 98.1%, respectively.
The Perth-based company, which will house BHP's unwanted manganese, aluminum, nickel, coal and silver assets, might enter the mergers and acquisitions arena itself as soon as the end of the year, its CEO-elect Graham Kerr told reporters ahead of the vote's results.
"If we do go into the M&A space, it will be opportunistic and it will be only where we see value," said Kerr in Perth. "Companies that start on day one saying we have to go buy something, they end up paying too much at the wrong time and put themselves into trouble. We will be ready, but it is not the primary focus."
Kerr said South32 will initially focus on cost-cutting and extending the life of its existing operations, but noted that the company's low levels of debt gave it room to pursue deals at a time when many of its rivals were looking for ways to reduce their leverage. South32 will consider acquisitions in any commodities but gold, so long as a deal would add value, said Kerr.
The company will begin life with $675 million in net debt. That will be dwarfed by its expected market capitalization, though analysts have had a hard time agreeing on what that valuation will be. Morgan Stanley (MS) has predicted that South32 will be worth as little as $7 billion, while Citigroup (C) has set an estimated range of between $12 billion and $13.3 billion. South32's assets generated revenue of $8.3 billion and EBITDA of $446 million in 2014.
South32 could spend as much as $3 billion to bolster its operations, according to a Deutsche Bank (DB) report last month. Deutsche identified the 40% that South32 doesn't already hold in South Africa's Samancor Manganese as a possible early target. The stake, owned by Anglo American, could be worth about $1.4 billion.
Others have chosen to focus on the possibility of an even bigger deal, one in which South32 is the target.