Hostile takeover bid in fertiliser world rejected

19-08-2010 | Home | News

Potash Corp. of Saskatchewan Inc. said it rejected an unsolicited buyout offer from Australia’s BHP Billiton mining.

BHP Billiton made a $38.6 billion all-cash offer to take over one of the world’s largest fertilizer, industrial and animal feed companies.

Potash Corp. chairman Dallas Howe called BHP Billiton’s bid "opportunistic" and in a letter said: "Potash Corp. is significantly and disproportionately undervalued as a result of our strategic decisions to match production with demand while continuing to invest in our infrastructure. Your proposal fails to adequately recognize the value of Potash Corp.’s premier position in the industry, the value of our planned capacity expansions and the value of our equity investments."

BHP is talking about offering $130 a share for Potash stock, a value that has been described as grossly inadequate by the Potash board.

Poison pills
In response Potash yesterday revealed details of a shareholder rights plan that is automatically triggered when a hostile bidder buys up 20% of its stock.

Such schemes, commonly known as poison pills, or here the so-called Potash shareholder rights plan, would have the effect of diluting a hostile bidder’s stake and is designed to force a bidder to pay a premium price.

It also seems to be designed as much to help management keep their jobs as it does to protect shareholders.

Early signs are that Potash will be fighting hard to get a higher price and, as ever with these deals, BHP must be careful not to overpay.

Potash Corporation of Saskatchewan Inc. (PCS) is an integrated fertilizer and related industrial and feed products company.

Its phosphate operations include the manufacture and sale of solid and liquid phosphate fertilizers, animal feed supplements and industrial acid, which is used in food products and industrial processes.