PotashCorp turns down US$39bn approach from BHP Billiton

Finance

Potash Corporation of Saskatchewan Inc has publically turned down an approach from BHP Billiton, valuing the company at nearly US$39 billion.

According to a letter published by the fertiliser company, BHPB chief executive Marius Kloppers met with PotashCorp’s president and chief executive Bill Doyle on August 12 to discuss a US$130/share takeover proposal.

“We have fully negotiated a financing-facilities agreement with our relationship banks, which is sufficient to fund the transaction,” said BHPB chairman, Jac Nasser in the letter placing an August 18 deadline for a formal response.

Mr Nasser said the purchase price represented a 20% premium to the August 11 closing price, and a 32% premium to the previous 30-day average. “This premium is in line with the average for acquisition transactions in Canada.”

In response, PotashCorp says its board and independent advisors have reviewed the “unsolicited” proposal, and concluded that it was “grossly inadequate” and “not in the best interests of shareholders.”

The company named four factors which it considered in making its decision; PotashCorp's strong growth prospects, its unique, unparalleled assets, an inadequate premium and the opportunistic nature of the bid by BHP Billiton.

As a defence, the company has adopted a rights plan, subject to TSX acceptance, of one share-purchase right for each share. The rights will become excercisable if an entity's ownership total's 20% or more of the company.

PotashCorp has the world’s largest production capacity for potash, and the third largest for nitrogen and phosphate.

BHPB has confirmed its approach, saying that to date, PotashCorp has not agreed to engage in discussions.