Potash demands 'big boy price' as it says no to BHP's £25bn bid

BHP Billiton will not be allowed to "steal" Potash Corporation of Saskatchewan, the Canadian company's chief executive warned yesterday, describing the mining giant's $38.5bn (£25bn) offer as "grossly inadequate".

Bill Doyle said BHP would have to come back with a "big boy price" after its initial $130-a-share approach was rebuffed. The offer represented a 16 per cent premium to Monday's closing share price of the world's largest fertiliser maker – a level that was dismissed by the PotashCorp board for ignoring its "strategic position".

In a letter to BHP's chairman Jacques Nasser, PotashCorp's board said the offer was "highly opportunistic". It added: "[The proposal] fails to adequately recognise the value of PotashCorp's premier position in the industry, the value of our planned capacity expansions and the value of our equity investments". Last month, PotashCorp said its second-quarter net profits had more than doubled to $472m.

BHP confirmed its bid had been rejected, but refused to say whether it would make an improved offer. Any new approach would be made more difficult, however, after PotashCorp's board sanctioned a shareholder rights plan, or poison pill, designed to prevent anyone from gaining more than a 20 per cent holding in the company.

In a statement, the company said: "The rights plan is intended to ensure that in the context of a formal takeover bid, the board of directors of PotashCorp has sufficient time to explore and develop alternatives to enhance shareholder value, including competing transactions that might emerge."

PotashCorp published a letter from Mr Nasser, headed as "strictly private and confidential" and dated 13 August, in which the BHP chairman described the offer as "attractive and which fairly reflects PotashCorp's value".

Mr Doyle met his BHP counterpart, Marius Kloppers, on 12 August when the takeover proposal was made. PotashCorp's board decided to reject the offer after two meetings.

Mining analysts said they expected an improved offer from BHP. Michael Rawlinson, a director at Liberum Capital, said the company could offer as much as $60bn before the deal looked too expensive.

He said: "Potash has long been mooted as a target for BHP and we feel it could have moved earlier – BHP's offer was made at a 40 per cent premium to Potash's average share price in 2009. That said, the offer has been made at a 45 per cent discount to Potash's all-time high. BHP can fund an offer entirely through debt, therefore it looks cheap – we estimate it can pay up to $60bn and still be earnings accretive.

"We expect BHP to return with a counter bid, however, it can afford to take its time since we do see any interloper risk. To us the acquisition of Potash can only be done by BHP alone and the only group BHP may find itself competing against is its own shareholders."

Potash is used as a fertiliser and is derived from potassium. BHP Billiton said in June that it sees potash as an ideal fit to its existing portfolio, and that it was keen to develop its existing Canadian assets.

Earlier this year, BHP announced plans to spend $240m developing its Jansen potash project in Saskatchewan. This was followed in March by the $320m acquisition of another Toronto-listed group, Athabasca Potash. The Saskatchewan region holds more than half of the world's potash reserves.

News of BHP's offer for PotashCorp underlines the mining sector's renewed readiness for merger and acquisition deals, and follows Vedanta Resource's announcement on Monday that it was preparing to spend as much as $9bn on a majority stake in the oil producer Cairn India.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

Day In a Page

Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones