TORONTO:'' Potash Corp'' on Tuesday, Aug 17 spurned an unsolicited, $38.6 billion takeover offer from BHP Billiton, revealing a proposal that would vault the Australian miner to the top of the world's fertilizer industry.
The acquisition offer -- the largest of the year in any industry -- was immediately branded by Potash Corp of Saskatchewan as "grossly inadequate," though the Canadian company said it might consider a more attractive proposition.
Investors, anticipating that BHP's $130-a-share offer would eventually rise, pushed Potash Corp's New York-traded shares to as high as $144.40 on Tuesday, Aug 17 well above the bid price.
"I am not saying that we are opposed to a sale, but what I am saying is we are opposed to a steal of the company," Potash Corp Chief Executive Bill Doyle said on a conference call.
Doyle's stance is likely to test the determination of BHP CEO Marius Kloppers to make his company the instant leader of a new mining segment. Potash Corp launched a shareholders rights plan that would make it more expensive to acquire the company.
Already one of the world's largest miner, BHP is looking to capitalize on a resurgence in the global fertilizer industry following a collapse in demand during the global economic slowdown. Potash Corp currently ranks as the No.1 global supplier.
"They're interested in getting in the business because they feel it's something that's going to be lucrative in the future and they've chosen a point where Potash Corp stocks are trading at a very low level and ... grain prices globally are lifting," said Patricia Mohr, vice-president of Scotiabank Group, an economics and commodity market specialist. "And with that, fertilizer demand is picking up."
CONSOLIDATION
The steady rise in demand for crop nutrients like potash over the past year is expected to accelerate as the world's population grows.
With the rebound in demand, the fertilizer sector has emerged as a hotbed of acquisitions over the past year in North America and Russia, garnering the attention of the mining industry's biggest players.
"The offer is not surprising given the speculation surrounding BHP, Vale and Rio Tinto having keen interest in the fertilizer industry," said Soleil Securities analyst Mark Gulley, referring to three of the world's largest mining companies.
Three months ago, a year-long takeover battle involving four North American producers -- Agrium, Yara, CF Industries and Terra Industries -- culminated with CF's acquisition of Terra Industries.
In Europe, Russia is now consolidating its potash industry into a single national champion that would rank as the world's second biggest producer behind Potash Corp.
Kremlim-backed billionaire Suleiman Kerimov has bought more than 50 percent of Russian potash giants Uralkali and Silvinit with some business allies. Market sources expect the state to support a merger between the two. [ID:nLDE67F0DD]
Under Kloppers, appointed as chief executive in 2007, BHP steadily increased its holdings Saskatchewan's potash belt. The company has acquired exploration lands and submitted plans for the Jansen project, the province's first new potash mine in 40 years.
BHP hasn't said if that project will go ahead should it acquire Potash Corp, but its target has long considered the project little more than a precursor to a bid.
"The Jansen project has been a smokescreen, a charade so to speak," Doyle said. "We clearly saw through it." BHP'S BID
Potash Corp currently ranks as the No.1 global supplier, with six mines in Saskatchewan and one in New Brunswick. It also has 7 phospate and three nitrogen operations in the United States, along with a phosphate operation in Trinidad and equity stakes in fertilizer companies in China, Israel, Jordan and Peru.
"The initial offer is way too low for change of control of the global leader ... And we view the board's rejection as appropriate," said Soleil's Gulley, who believes that Potash Corp could attract rival bids from mining giants Rio Tinto and Vale .
At least one major shareholder rejected the bid outright. Jarislowsky Fraser, the fourth-largest holder of Potash Corp stock according to Thomson Reuters data, branded the offer as inadequate.
"We think the price is not sufficient. We are on the same wavelength as management. It undervalues the assets," said Denis Durand, a partner at Jarislowsky Fraser, which holds about 8.8 million shares.
BHP's offer of $130 in cash for each share of Potash is only a premium of 16 percent to its Monday closing of $112.15 on the New York Stock Exchange.
BHP's bid is richer than Potash Corp's 52-week high of $128.42, but well below the company's all-time-high of more than $240 a share, touched in mid-2008.
Potash Corp shares closed up 28 percent at $143.17 in New York.
The company has adopted a shareholder rights plan to guard against any hostile moves and said it was not in the best interests of shareholders to enter talks with BHP.
The rights plan, designed to make it prohibitively expensive to buy the company, would kick in if any one shareholder acquired more than 20 percent. It would give shareholders the right to buy one additional share at a discount for each they already owned as of the close of business on Aug. 16.
Shares of rival fertilizer producers also rose. Germany's K+S were up 5.7 percent, while those of Norway's Yara rose 5.9 percent. Shares of North American rivals Mosaic Co and Agrium Inc jumped as well.
After Potash Corp's rejection of the offer, BHP said it is reviewing its options and it will make a further announcement in due course. Its shares closed 2.4 percent lower at 1916 pence on the London Stock Exchange.
BofA Merrill Lynch, Goldman, Sachs & Co. and RBC Capital Markets are acting as financial advisers to Potash Corp, and Jones Day and Stikeman Elliott are acting as its legal advisers. - Reuters
The acquisition offer -- the largest of the year in any industry -- was immediately branded by Potash Corp of Saskatchewan as "grossly inadequate," though the Canadian company said it might consider a more attractive proposition.
Investors, anticipating that BHP's $130-a-share offer would eventually rise, pushed Potash Corp's New York-traded shares to as high as $144.40 on Tuesday, Aug 17 well above the bid price.
"I am not saying that we are opposed to a sale, but what I am saying is we are opposed to a steal of the company," Potash Corp Chief Executive Bill Doyle said on a conference call.
Doyle's stance is likely to test the determination of BHP CEO Marius Kloppers to make his company the instant leader of a new mining segment. Potash Corp launched a shareholders rights plan that would make it more expensive to acquire the company.
Already one of the world's largest miner, BHP is looking to capitalize on a resurgence in the global fertilizer industry following a collapse in demand during the global economic slowdown. Potash Corp currently ranks as the No.1 global supplier.
"They're interested in getting in the business because they feel it's something that's going to be lucrative in the future and they've chosen a point where Potash Corp stocks are trading at a very low level and ... grain prices globally are lifting," said Patricia Mohr, vice-president of Scotiabank Group, an economics and commodity market specialist. "And with that, fertilizer demand is picking up."
CONSOLIDATION
The steady rise in demand for crop nutrients like potash over the past year is expected to accelerate as the world's population grows.
With the rebound in demand, the fertilizer sector has emerged as a hotbed of acquisitions over the past year in North America and Russia, garnering the attention of the mining industry's biggest players.
"The offer is not surprising given the speculation surrounding BHP, Vale and Rio Tinto having keen interest in the fertilizer industry," said Soleil Securities analyst Mark Gulley, referring to three of the world's largest mining companies.
Three months ago, a year-long takeover battle involving four North American producers -- Agrium, Yara, CF Industries
In Europe, Russia is now consolidating its potash industry into a single national champion that would rank as the world's second biggest producer behind Potash Corp.
Kremlim-backed billionaire Suleiman Kerimov has bought more than 50 percent of Russian potash giants Uralkali
Under Kloppers, appointed as chief executive in 2007, BHP steadily increased its holdings Saskatchewan's potash belt. The company has acquired exploration lands and submitted plans for the Jansen project, the province's first new potash mine in 40 years.
BHP hasn't said if that project will go ahead should it acquire Potash Corp, but its target has long considered the project little more than a precursor to a bid.
"The Jansen project has been a smokescreen, a charade so to speak," Doyle said. "We clearly saw through it." BHP'S BID
Potash Corp currently ranks as the No.1 global supplier, with six mines in Saskatchewan and one in New Brunswick. It also has 7 phospate and three nitrogen operations in the United States, along with a phosphate operation in Trinidad and equity stakes in fertilizer companies in China, Israel, Jordan and Peru.
"The initial offer is way too low for change of control of the global leader ... And we view the board's rejection as appropriate," said Soleil's Gulley, who believes that Potash Corp could attract rival bids from mining giants Rio Tinto
At least one major shareholder rejected the bid outright. Jarislowsky Fraser, the fourth-largest holder of Potash Corp stock according to Thomson Reuters data, branded the offer as inadequate.
"We think the price is not sufficient. We are on the same wavelength as management. It undervalues the assets," said Denis Durand, a partner at Jarislowsky Fraser, which holds about 8.8 million shares.
BHP's offer of $130 in cash for each share of Potash is only a premium of 16 percent to its Monday closing of $112.15 on the New York Stock Exchange.
BHP's bid is richer than Potash Corp's 52-week high of $128.42, but well below the company's all-time-high of more than $240 a share, touched in mid-2008.
Potash Corp shares closed up 28 percent at $143.17 in New York.
The company has adopted a shareholder rights plan to guard against any hostile moves and said it was not in the best interests of shareholders to enter talks with BHP.
The rights plan, designed to make it prohibitively expensive to buy the company, would kick in if any one shareholder acquired more than 20 percent. It would give shareholders the right to buy one additional share at a discount for each they already owned as of the close of business on Aug. 16.
Shares of rival fertilizer producers also rose. Germany's K+S
After Potash Corp's rejection of the offer, BHP said it is reviewing its options and it will make a further announcement in due course. Its shares closed 2.4 percent lower at 1916 pence on the London Stock Exchange.
BofA Merrill Lynch, Goldman, Sachs & Co. and RBC Capital Markets are acting as financial advisers to Potash Corp, and Jones Day and Stikeman Elliott are acting as its legal advisers. - Reuters
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