BHP goes hostile with $40bn PotashCorp bid

BHP Billiton has turned hostile with the $40bn (£26bn) cash offer rejected by the Canadian fertiliser giant Potash Corporation as "highly opportunistic" and "grossly inadequate".

Marius Kloppers, the BHP chief executive, took his offer directly to PotashCorp's shareholders yesterday and reiterated the claim that the $130-per-share bid was an "attractive offer", stressing that it is fully funded, will be paid in cash and represents a 20 per cent premium to PotashCorp's closing price the day before it was made.

But Saskatchewan-based PotashCorp maintains that the price does not recognise the massive growth potential in the fertiliser market as infrastructure-building in the developing world and rising populations put increasing pressure on agricultural production. The company also points out that its shares were at $240 less than two years ago.

PotashCorp stock has soared far above the bid price since BHP's approach, breaching $147 yesterday. But Mr Kloppers said all data on the fundamentals of the business were priced in after the company's recent results, and dismissed the surge as speculation of a raised offer.

BHP has given no indication of whether – or how far – it is willing to raise its price, repeating only that the offer was the result of a "bottom up" valuation of the business. The next step will be advertisements in the Canadian press offering to buy shares at $130, expected to run tomorrow.

Mr Kloppers refused to be drawn on the reaction from PotashCorp shareholders so far, or even if talks had taken place. "The most important thing for me is to make sure we satisfy the conditions of the regulatory authorities in Canada," he said. "That will be the focus over the next days and weeks."

PotashCorp has set up a "poison pill" which triggers a discounted one-for-one rights issue as soon as anyone acquires more than 20 per cent of its share capital. But such schemes are a standard part of defending against a hostile bid in Canada, and it is unlikely to affect the outcome of any deal. Either way, BHP is unlikely to be deterred. Not only does the $40bn price tag catapult the deal to the top of this year's takeover league. The acquisition also fits in with BHP plans to become a world-leading potash miner. And although the company might claim it could build up its existing potash business, there are huge benefits to buying in the technology and expertise from the market leader.

But predictions on price vary enormously – from as little as $150 to as much as $200. Now that the bid is hostile, the final price will be lower, says Charles Kernot at Evolution Securities. "Because PotashCorp won't open its books it is more of a risk, so BHP is unlikely to go above $160," he said.

Mr Kloppers himself has a lot riding on the deal. His last attempt at a massive takeover – a $147bn hostile bid for Rio Tinto – foundered in late 2008. And although its collapse can be justifiably blamed on the financial crisis, the failure of a second ambitious venture would still severely damage his credibility. "Marius Kloppers has to make sure this is a success," Mr Kernot said. "So it will happen – it's just a question of price."

Start your day with The Independent, sign up for daily news emails
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific