BHP Billiton targets Potash Corp with hostile 40-bln-dlr bid

18th August 2010, Comments 0 comments

Anglo-Australian mining giant BHP Billiton on Wednesday launched a mammoth hostile takeover bid for Canada's Potash Corp which values the world's largest fertiliser producer at 40 billion dollars.

"Potash Corp will provide BHP Billiton with an immediate leadership platform in the global fertiliser industry and further diversify BHP Billiton's portfolio," BHP said in a statement unveiling the news, one day after Potash had rejected an unsolicited approach.

The offer, worth the equivalent of 31 billion euros, would allow the energy and metals giant to expand in the agricultural sector amid soaring wheat prices and keen food demand to meet the needs of the world's rising population.

Potash is a fertiliser that is widely used in farming to replenish nutrients in soils and increase crop yields.

The cash offer was pitched at 130 dollars per Potash share -- the same level as BHP's earlier informal bid that Potash has already slammed as "grossly inadequate" on Tuesday.

BHP chairman Jac Nasser said Wednesday that his company had decided to put its offer directly to Potash investors.

"We firmly believe that Potash Corp shareholders will find the certainty of a cash offer, at a premium of 32 percent to the 30-trading day period average, very attractive and we have therefore decided to make this offer directly to those shareholders," Nasser said.

BHP Billiton is the world's biggest miner and produces coal and iron for the global steel industry, as well as a host of other metals and commodities along with oil and gas.

The group's fortunes have been built on recent years on soaring demand from China's booming economy but it also has huge interests across the globe.

On Tuesday, Potash had snubbed BHP's informal approach and outlined a plan to prevent a hostile takeover.

The Canadian firm said it would adopt measures allowing ordinary shareholders to buy more shares cheaply, should an outside party build up a single stake in the company of 20 percent or more.

BHP said Wednesday that its offer was dependent on the termination of this plan, as well as regulatory approvals.

The group recently paid 320 million dollars for Athabasca Potash, which is also based in Saskatchewan and holds more than half the world's potash reserves.

Jonathan Jackson, head of equities at brokers Killik & Co, praised the audacious bid for Potash Corp.

"First, it increases the group's exposure to the structural theme of rising population and grain demand and limited arable land.

"The second benefit of the deal is the increased diversification that it brings," he said, adding that he expected BHP to raise its offer.

BGC Partners strategist analyst Howard Wheeldon agreed that the takeover bid was a "wise" move.

"BHP is wise to tap into the agricultural sectors if it can," he told AFP.

"With global populations increasing, and the need to feed ourselves ever more acute from land areas that cannot expand, (this area) is also one that should carry with it excellent margin potential."

However, Citigroup analysts warned that BHP would be better off developing its own existing potash project in Canada.

"In our opinion, BHP would be better off not pursuing an acquisition of Potash Corp. The cost of obtaining a friendly deal that would be needed to gain approval ... looks too high," they wrote in a note to clients.

In reaction to the offer, BHP's share price sank 3.03 percent to 1,857 pence in late afternoon trade on the London stock market, which was down 0.84 percent.

© 2010 AFP

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