BHP starts aggressive bid for Potash Corp

[] — Anglo-Australian mining giant BHP Billiton launched a a hostile takeover bid on Wednesday for Canada’s Potash Corp which values the world’s largest fertiliser producer at about $40bn.

“BHP Billiton today announced its intention to make an all-cash offer to acquire all of the issued and outstanding common shares of Potash Corporation,” the group said in a statement.

“The offer values the total equity of Potash Corp at approximately $40bn on a fully-diluted basis.”

Late on Tuesday, a source said the company was considering bypassing the Potash Corp board, which has rejected its $38.6bn offer, to instead submit the offer directly to the Canadian group’s shareholders.

Shares in BHP Billiton slipped 3.5% on concerns among investors that it would be forced to over-pay for Potash Corp in what already amounts to the world’s largest takeover offer so far this year.

“We’re surprised at the multiple that they’re prepared to pay for Potash Corp,” said James Bruce, a portfolio manager at Perpetual Investments, which owns BHP shares.

BHP Billiton has long been interested in expanding into potash for its next spurt of growth, but investors had expected it to focus on growing its own assets, including the Jansen potash deposit in Canada.

Potash Corp of Saskatchewan has left the door ajar, saying it might consider a more attractive proposition.

There is some speculation that other bidders could enter the fray, but one investor said rival miners like Brazil’s Vale and Rio Tinto would be hard-pressed to bid against deep-pocketed BHP Billiton.

“The organisation (BHP Billiton) has exhibited a very disciplined approach to M&A activity historically. There’s no reason it’ll change from this point on,” said Tim Schroeders, a portfolio manager at Pengana Capital, also a BHP shareholder.

Rohan Walsh, investment manager at Karara Capital, another BHP shareholder, agreed.

“It’s a sizable acquisition. There are not too many companies that can do that. There are not too many dance partners Potash can dance with,” Walsh said.

At around 10:25 BHP traded 1.73% lower on the JSE at R213.60.