BHP Billiton "made an unsolicited $38.6 billion offer for the world's largest fertilizer producer, Potash Corp. of Saskatchewan Inc., in an aggressive wager that developing economies will drive up demand for the world's food supply" according to the Wall Street Journal.
Potash "is the common name for various compounds containing potassium, which are used mainly as fertilizers." It is used to improve disease resistance, crop quality and yields. "Global potash supplies are relatively limited, and Potash Corp., based in the prairies of central Canada, controls approximately 20% of the supply."
BHP sent an unsolicited offer of $130 per share in cash and a 16% premium of the Monday closing price to Potash Corp. The board rejected the offer calling it "grossly inadequate." CEO, Bill Doyle stated that the board was not opposed to a sale and traders expect either BHP to raise its bid or other buyers to emerge. The Wall Street Journal reports that BHP has taken its bid directly to the shareholders, making the offer "hostile." Click here to read the updated story (subscription required).
Canada is currently amid a national debate over open markets and foreign takeovers. In 2009, "Canada amended its foreign-takeover code raising the size of deals that require scrutiny but allowing the government explicit power to veto deals thought to pose a danger to national security."
Rising demand for fertilizer is expected in the future. "The world is projected to add an average of 57 million people a year between 2000 and 2050, leading to a population of 8.9 billion in 2050, according to United Nations projections." Rising incomes will increase demand for diverse diets and the International Fertilizer Industry Association forecasts that fertilizer demand will rise 4.8 percent in 2010-2011.
To read the Wall Street Journal story, click here.
Posted: 08/19/2010
