Drilling rig at a BHP Billiton minesite about 550 km outside of Newman, Western Australia. Photo: Wikipedia
Potash Corp (NYSE:POT) the world’s largest fertilizer producer formally rejected BHP Billiton’s bid to take over the company claiming that they were exploring other options. Potash said that the Anglo-Australians offer of $40 billion was “wholly inadequate” and better offers were expected to emerge.
BHP Billiton began its hostile takeover of Potash on August 18 when they had their initial informal offer of $40 billion turned down. The cash offer was a bid of about $130 for each potash share, an offer the company had termed as “grossly inadequate”. On Monday, Potash urged their shareholders to turn down the offer. Chief executive Bill Doyle said, “The Potash Corp board of directors is unanimous in its belief that the BHP Billiton offer 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… We strongly urge shareholders to reject BHP Billiton’s opportunistic offer and not tender their shares.”
Doyle, who stands to earn a half-billion dollars from a deal, said the company was considering all its options including joint ventures and levering up the company’s balance sheet. He did not name a price for which the company would be ready to sell for but said it should be “a hell of a lot more than the price on the table.”
BHP, even if they are willing to raise their bid, cannot do it immediately. They will have to wait for Wednesday’s fiscal report, then wait for the new bid to go through the normal regulatory approval process. Meanwhile the Chinese also seem to be ready to swoop in and save the day. One of the parties being named as competing bidder is Sinochem, a source close to the deal said. Sinochem is China’s top fertilizer firm, biggest chemical trader and the fourth biggest oil company.