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Merger Report Of BHP Billiton & Anglo-Dutch

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Added on  2020-02-24

Merger Report Of BHP Billiton & Anglo-Dutch

   Added on 2020-02-24

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Slide 2– BHP Billiton was formed in the year 2001 when there was a merger between twomining groups i.e. BHP from Australia and also Anglo Dutch Billiton Plc from UK. Owing tothe roots in both UK and Australia, the company is listed on both the exchanges i.e. LSX andASX. The existing market capitalization of the company stands at $ 111 billion with arevenue of $ 31 billion (which has declined in the recent years) and $ 3 billion PAT (FY2015).The company is a mining behemoth as is apparent from the wide segments which clearlyreflects a diversified portfolio led by iron ore & coal. The mines of the company aregeographically distributed with Australia hosting most of the mines but the mines are alsofound in North America (US, Canada, Mexico), South America (Brazil, Chile, Peru, Colombia)along with Africa (Algeria).Slide 3- Financial reporting is aimed at fulfilling the information needs of the variousstakeholders. Shareholders and lenders are two critical stakeholders. The shareholders haveto take decision if the underlying stock is investment worthy at current price levels or not. Inthis context, Earnings per Share or EPS is critical as Price/EPS multiple typically depends thefair price of the share. Additionally, the leverage is also significant particularly in the contextof future growth as business is capex driven. Dividends are also crucial as reflected fromcash flow statement. With regards to lenders, enough operating profits need to begenerated so as to honour interest obligations. Further, the ratios in context of liquidity andsolvency should be healthy based on which the extent of exposure is fixed and also thesecurity is demanded.Slide 4 – Another vital stakeholder is the government along with regulators. The financialstatements reflect the level of adherence to various disclosure and accounting standards.This is critical as it is a public listed company. Further, in adverse times such as the ongoingtime, there is increased risk of window dressing in accounts and misreporting whichregulators need to be vigilant about. For mining business, a pivotal role is played bycontractors which render a host of service. The revenue of the company is imperative as ithints at the prevailing commodity prices. Further, the short term liquidity ratios would beimperative as it affects the short term ability of the company to meet payment obligationsfor contractors.
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