BHP's $39 bn offer rejected by potash corp board

Potash Corp of Saskatchewan Inc, the world’s largest fertiliser producer, rejected an unsolicited $39 billion takeover proposal from BHP Billiton Ltd as too low, prompting speculation of a higher bid.

Potash Corp’s board turned down the offer of $130 a share in cash, saying it “unanimously believes that the BHP Billiton proposal substantially undervalues Potash Corp and fails to reflect both the value of our premier position in a strategically vital industry and our unparalleled future growth prospects,” Chairman Dallas Howe said today in a statement.

Potash Corp, based in Saskatoon, Saskatchewan, produces fertiliser, industrial and animal feed products. Consolidation in the fertiliser industry is increasing as the population grows, boosting the need for food. The global population will swell to 9.1 billion in 2050 from 6.8 billion, the United Nations’ Food and Agriculture Organization said in September.

“What is clear from this is that the potash industry is going to be consolidated by the mining industry,” Paul Cliff, an analyst at Nomura Holdings Inc in London, said. “And that may happen a lot quicker than most people thought.” Cliff has a “reduce” rating on BHP stock.

Rivals gain
Potash rose $37.85, or 25 per cent, to $140 as of 6:51 am in pre-market trading on the New York Stock Exchange. The company has a market value of $33.3 billion, based on yesterday’s closing price. Competitors Intrepid Potash Inc and Mosaic Co also advanced in pre-market trade. Yara International ASA, the largest publicly traded nitrogen-fertiliser maker, jumped 4.8 per cent to 251.4 kroner in Oslo.

BHP dropped 1.4 per cent to 1,934.5 pence in London. Illtud Harri, a spokesman for Melbourne-based BHP, declined to comment.

Rising demand for potash, especially after the US forecast a decline in wheat output because of adverse weather in Russia, Ukraine and Kazakhstan, is also driving acquisitions elsewhere. Last week PhosAgro, the world’s second-largest maker of phosphate fertiliser, said it’s seeking a merger with Russian potash producer OAO Silvinit. Troika Dialog said on August 16 that Silvinit may merge with Russia’s OAO Uralkali.

BHP Chief Executive Officer Marius Kloppers said last August that his company would spend “billions of dollars” to develop its Jansen potash project in Canada, which is near Potash Corp’s mines.