Potash rejects 'grossly inadequate' BHP Billiton $43 billion offer
Potash Corp of Saskatchewan Inc announced overnight it has rejected an unsolicited takeover bid from Australian diversified natural resources company BHP Billiton (ASX:BHP) worth about $US38.49 billion ($42.85 billion).
The Canadian fertiliser producer has refused the proposal saying it was "grossly inadequate'' as it failed to both reflect the value of its premier position in the fertiliser business in a "strategically vital industry".
The Potash board also adopted a poison pill shareholder rights plan to impede anyone from seizing more than a 20 per cent stake as it shores up company defences.
It said the proposed offer price was a premium of only 16 per cent over Potash Corp's August 16, 2010 closing stock price. Based on yesterday's end price, the company has a market value of $US33.3 billion
Potash rose $US37.85, or 25 per cent, to $US140 on the company's initial reaction.
With shares soaring above the bid price to a new 52-week high, many investors think that the offer is only going to increase.
The BHP takeover bid takes place amid an industry-wide buying spree, with global agribusiness firms expecting solid growth in demand for crops and livestock as the recession fades.
"It's a form of a commodity play," said Scott Irwin, professor of agriculture at the University of Illinois, Urbana-Champaign.
Back in 2007 and 2008, fertiliser prices inflated along with increasing consumption in the third world and crop-based fuels in developed countries, he said.
Agribusiness firms like BHP intends to take over fertiliser companies while prices are relatively low, Mr Irwin said.
Potash President and CEO Bill Doyle believes the timing of the proposal "is highly opportunistic and an ill-disguised attempt" to lift Potash's share price before giving a better offer.
"I am not saying that we are opposed to a sale, but what I am saying is we are opposed to a steal of the company," Mr Doyle said.