BHP Billiton Ltd. (NYSE: BBL) Demerges in Midst of Busy M&A Activity

Global metals and mining giant BHP Billiton Ltd. (NYSE: BBL) is looking to simplify its portfolio of mining assets by spinning off a portion of its business into a separate entity.

BBL stock was down 5.4% on the news when markets opened this morning.

This so-called demerger is a departure from the sudden burst of M&A transactions making headlines this week, including Dollar General Corp.'s (NYSE: DG) $8.95 billion offer to buy Family Dollar Stores Inc. (NYSE: FDO), and Skilled Healthcare Group Inc.'s (NYSE: SKH) merger with Genesis Healthcare.

Referred to as "NewCo" in a press release, the new company would get the Anglo-Australian firm's aluminum, coal, manganese, nickel, and silver assets, leaving its larger counterpart with its iron ore, copper, petroleum, and potash basins.

"For over a century, BHP Billiton has progressively reshaped its business to maintain its industry leadership," BBL Chairman Jac Nasser said in a press release. "We believe the proposed demerger, if implemented, will accelerate the simplification of the [BHP Billiton Group's] portfolio, provide investors with choice and unlock value in both companies."

NewCo will receive noncore assets such as the Cerro Matoso nickel mine in Colombia, its South African energy coal operations, its Illawarra coking coal business, and the Cannington lead, silver, and nickel mine.

The new company will be an Australian-incorporated company listed on both the ASX and Johannesburg exchanges. The chief executive officer (CEO) will be BBL's current chief financial officer (CFO), Graham Kerr, and the new CFO will be BBL's current head of investor relations, Brendan Harris.

The demerger will be subject to approval by the board.

Reception of BBL's Demerger

BBL is the largest publicly traded mining conglomerate, with a strong balance sheet and a diverse portfolio of commodities.

However, maturing markets in Asia have delivered a blow to BBL's earnings as of late.