A $38.6-billion US bid for Potash Corp. of Saskatchewan Inc. by the world’s largest mining company is being dismissed by the fertilizer company’s CEO as a "feeble" takeover attempt.
"It severely undervalues the company on every count," said Bill Doyle. "We just won’t let someone steal the company."
Speaking to The StarPhoenix from the company’s corporate office in Northbrook, Ill., PotashCorp’s chief executive said BHP Billiton’s proposal to buy the fertilizer giant in a $130 US per share cash deal is an aggressive move not welcomed by the Saskatoon-headquartered business.
"It’s a totally inadequate, beyond opportunistic approach not reflective in any way, shape or form of the value of (PotashCorp)," Doyle said.
Doyle declined to say how much he believes the company is worth, but criticized BHP for the timing of its bid, explaining the proposal comes just as the global potash market begins a rebound after a difficult 2009.
Saying PotashCorp wasn’t surprised by the acquisition proposal, Doyle suggested BHP’s plan to build a greenfield — or brand new — potash mine at its Jansen site near Lanigan was designed to take the shine off PotashCorp’s brownfield — or existing — potash mines in Saskatchewan and New Brunswick and hurt PotashCorp’s share value.
BHP has yet to make a production decision for the Jansen site or its other Saskatchewan properties.
"I just think that all these comments and this multi-year strategy of floating the possibility of greenfield was obviously designed to drive down the value of PotashCorp’s shares," Doyle said.
The takeover bid is a sign, he added, that BHP doesn’t intend to immediately build a new mine, instead opting to buy existing, operating properties.
"It just never (made) sense that they’d go the greenfield route," he said. "It takes too long, it’s too expensive and at a time barrier to entry, it affects them as it does everyone else.
"I just never, ever believed them and I think this offer proves that was pretty much a charade."
On Aug. 12, Doyle met with BHP’s chief executive, Marius Kloppers. The meeting saw the Australia-based company outline its purchase proposal for PotashCorp, according to an
Aug. 13 letter to PotashCorp board chair Dallas Howe from BHP board chair Jac Nasser. PotashCorp published the letter on its website Tuesday.
The letter says if the bid is successful, BHP would establish its global potash headquarters in Canada. The company would also base the president and management of its potash operations in Saskatchewan and commit to employment, capital and community programs, the letter says.
"We recognize the significant and unique capabilities of PotashCorp’s businesses and its employees are firmly committed to ensuring that PotashCorp’s businesses continue to play a leading role in the global fertilizer industry," the letter says.
"We are committed to being a strong corporate citizen in Saskatchewan and Canada."
BHP had little comment Tuesday on the proposal, only confirming in a statement on its website that it has approached PotashCorp regarding a possible acquisition and that PotashCorp has not agreed to discussions.
"BHP Billiton continues to review its options and will make a further announcement in due course," the third and final sentence of the statement says.
PotashCorp’s board of directors unanimously rejected the bid and adopted a shareholder rights plan that gives the company time to explore alternative options for shareholders — including competing transactions.
The rights plan, which is in effect for at least the next 90 days, permits the acquisition of control of the company through a permitted bid, a competing permitted bid or a negotiated transaction.
For now, business will continue as usual for PotashCorp, said Doyle. The CEO added the bid has pushed the company into the corporate limelight.
"If there’s one positive thing about it is it really shines a laser light on the tremendous value that Potash Corporation has," he said.
News of the BHP bid led to soaring stock prices for PotashCorp on the markets Tuesday. The company’s shares on the TSX (POT) saw a $30.11, or 25.68 per cent, increase in value, closing at $147.34.
PotashCorp’s shares on the NYSE (POT) also closed on a significant upbeat, rising by $31.02 US, or 27.66 per cent, to end the day at $143.17 US.
QUICK FACTS
POTASHCORP
– One of the world’s largest producers of fertilizer by capacity, with a market capitalization of $34.4 billion Cdn.
– Operates in seven countries, producing potash from six mines in Saskatchewan and one mine in New Brunswick. The company also produces nitrogen and phosphate products for use as fertilizer, animal feed and in industry worldwide.
– World headquarters are located in Saskatoon, with U.S. headquarters in Northbrook, Ill.
– Had 5,136 employees at the end of 2009.
– Expected to exceed 17 million tonnes of operating capacity by 2015.
BHP BILLITON
– World’s sixth-largest producer of primary aluminum, with a production capacity of about 1.3 million tonnes of aluminum, 15.6 million tonnes of bauxite and 4.5 million tonnes of alumina a year. One of the world’s top producers of copper, silver, lead, uranium and zinc.
– Employed about 40,990 people as of June 2009.
– Based out of Melbourne, Australia, BHP Billiton is one of the country’s oldest and largest companies, with a market capitalization of $119.86 billion US.
– Has positions in many major commodity businesses, including aluminum, energy coal, metallurgical coal, oil, gas, liquefied natural gas and diamonds. It operates twin marketing hubs in Singapore and The Hague, Netherlands.
– BHP Billiton has exploration rights to a total of about 14,000 square kilometres of highly prospective ground in the Saskatchewan potash basin
POTASHCORP HISTORY
1975: The NDP government of Saskatchewan creates the company as a Crown corporation to draw more profits from the burgeoning industry into public coffers.
1980s: Potash Corp. of Saskatchewan struggles, losing money for several years in the early ’80s. It accumulates an $800-million debt.
1989: The Progressive Conservative provincial government decides to privatize the company, selling it to investors. The government sold off the remainder of its shares by 1990.
1990s: PotashCorp expands, buying up a number of American potash companies, including Potash Co. of America, Florida Favorite Fertilizer, Texasgulf and Arcadian Corp.
2000s: Growing global demand for fertilizer stimulates rapid growth, with the company posting record earnings of $3.5 billion.
2009: Global demand collapses following the economic downturn, earnings shrink to $988 million.
2010: Company is experiencing renewed growth this year and expects a return to 2008 peak.
BHP SASK. ACTIVITIES
2006: Forms joint venture with Anglo-Potash with a 75 per cent interest in about 7,400 square kilometres of prospective lands in Saskatchewan and Manitoba.
July 2008: Acquires the remaining interest in Anglo-Potash.
September 2008: Opens a potash development office at Innovation Place in Saskatoon.
November 2008: Jansen project proposal submitted to Saskatchewan Environment and Resource Management.
April 2009: Jansen exploration project is completed.
June 2009: Boulder project identification study begins.
October 2009: Starts the pilot hole drilling program for the Jansen project. The program is completed in 2010.
November 2009: Boulder field exploration program begins. It concludes in March 2010.
March 2010: Acquires Athabasca Potash, increasing the exploration land position to about 14,000 square kilometres.
April 2010: Open house meetings are held in six communities nearest to the Jansen project.
May 2010: Site preparation begins for the Jansen ground freezing study. Ground freezing is necessary to safely and successfully sink the mining shafts because of the presence of local aquifers common to the region.
August 2010: BHP makes a $130 per share bid for PotashCorp.
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For extended coverage of the PotashCorp-BHP Billiton story, including audio of Tuesday’s PotashCorp conference call, the slideshow and letter of rejection PotashCorp shared with investors and more, head to TheStarPhoenix.com
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