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Teachers, Singapore Bidding on Potash

Submitted by Leo Kolivakis on 10/10/2010 15:57 -0400

Kate Holton of the Globe & Mail reports, Teachers, Singapore sovereign fund talk Potash:

Canada's
Ontario Teachers' Pension Plan is plotting a bid to spoil BHP
Billiton's $39-billion (U.S.) hostile offer for Potash Corp , British
newspaper The Sunday Times said.

The newspaper said the pension
fund was talking to Temasek, Singapore's sovereign wealth fund, about
launching a rival offer. The report said the two also had an industrial
partner, thought to be Teck Resources , a Canadian mining group.

The
discussions are at an early stage but the two funds are considering an
outright takeover or buying a minority stake at a higher price than
that offered by BHP.

Potash Corp, the worlds top fertilizer
maker, has flatly rejected BHP's $130-a-share bid. Sinochem , the
state-owned Chinese chemical group, is also viewed as likely to lead a
competing group.

British papers The Times and The Sunday
Telegraph also said Potash was considering defensive moves, which could
include a break-up of the business to fend off BHP.

Both
newspapers said one move Potash could make is to sell its nitrogen and
phosphorus operations and return up to $70 a share to its shareholders.

The
Telegraph said Potash was talking to groups such as OTPP and others,
which had received strong support from the Canadian government.

No
one from the London offices of the Ontario Teachers' Pension Plan was
immediately available to comment. A spokeswoman for Potash declined to
comment on the reports.

In an interview to
the Globe & Mail, Potash's CEO, Bill Doyle, said BHP’s $130
per-share offer, which values the company at $38.6-billion, is “a
non-starter” and he bluntly predicted that Potash Corp.’s stock would
“blow the doors off” its record high of about $240 if the company were to stay independent:

“When
you think about this company being sold for $130, $150, $160 or $170 –
when you look at the future growth of this company and where we are
going with the share price ... This deal has a long way to go,” Mr.
Doyle said.

“$170, that’s crazy.”

However, the decision will be made by Potash Corp. shareholders, he added.

Potash
Corp. has argued BHP’s bid is opportunistic, made just as it believes
potash prices are poised for a recovery as fertilizer demand increases
amid concerns of a global food shortage.

The company’s
stock reached an all-time peak of $239.50 on the New York Stock
Exchange on June 17, 2008, before a wrenching dive as the commodity
boom ended with a thud. The stock dropped as low as $49.60 just six
months later during the financial crisis.

Before the BHP bid, the shares had regained enough ground to top $100 apiece.

Mr. Doyle argued that the market for fertilizer producers has improved
enough since the bid in August that BHP’s offer is now below where
Potash stock would have been trading without it. He pointed to rival
fertilizer maker Mosaic Co., (MOS)
which has risen almost 20 per cent since the BHP bid on optimism about
demand. (There’s little or no takeover premium built into Mosaic,
since it is controlled by Cargill Inc.)

Mr. Doyle said the company is still in discussions with other potential bidders, and that he believes another offer will come.

“At the end of the day you are going to have a choice between a
transaction, or the company being a standalone entity. I can tell you, I
can make a very, very strong case that the best choice that could be
made will be that the company is a standalone entity because we are
going to blow the doors off the $240 share price.

“We just are, because we are positioned for growth like no other company in the world.”

Mr. Doyle can say that again. Potash Corp is one of the hottest growth stories in the world, and bankers have been working feverishly on a potential break-up plan
to fend off the $38.6bn bid from BHP Billiton. Looks like they've
succeeded, but stay tuned, something tells me this story is far from
over.

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Wed, 11/10/2010 - 06:47 | 715745 cheap uggs for sale

Mon, 10/11/2010 - 00:59 | 640309 mcarthur

I currently work for Potash Corp. Glad to see plenty of folks think we are worth a bundle. I suspect potash prices are heading north shortly since we can't come close to meeting demand these days. We are generally OK with this BHP thing but I'll retire if the Asians get involved, along with plenty of others.

Mon, 10/11/2010 - 00:05 | 640248 pitz

How can some abortion of a company dreamt up in a Stanford dorm room be worth 5X as much as POT, a firm that has real assets that can't be conjured out of thin air?

$130 is completely and utterly innappropriate.

Sun, 10/10/2010 - 18:31 | 639872 b_thunder

is anyone even asking the follwoing questions:

1. What is the threshold when adding fertilizer does not result in higher crop yield?

2. What is the threshold when adding fertilizer cost more that what the additional crops can be sold for?

3. How soon will these threshold be reached?

Sun, 10/10/2010 - 22:25 | 640072 Spitzer

Good point.

My Dad farmed for 30 years with no store bought fert, that also gave him the oppertunity to go organic and really make the big bucks.

These fert stocks remind me of base metal stocks.

Sun, 10/10/2010 - 18:56 | 639893 anonnn

re Potassium, Phosphate, organic Nitrogen, etc.---consult any reference for Leibig's Minimum. Established science can be terrifying.

After that, with patience, there is lotsa quality data at theoildrum.com website. Sorry forget name of main blogger on this subject.

Sun, 10/10/2010 - 17:18 | 639783 tom a taxpayer

Leo - Thanks for the update on this vital natural resource. The world-wide sovereign and commercial interests in acquiring future supplies indicate:

potash = agricultural gold.

Sun, 10/10/2010 - 17:11 | 639767 SteveNYC

"We just are, because we are positioned for growth like no other company in the world.”

Pretty bold statement.....this guy is some promoter! You'd think that the market would pick up on this, no?

Sun, 10/10/2010 - 17:22 | 639789 Leo Kolivakis

Market bidding up fertilizer shares like they're heading to the moon:

Sun, 10/10/2010 - 17:02 | 639739 Astute Investor

“When you think about this company being sold for $130, $150, $160 or $170 – when you look at the future growth of this company and where we are going with the share price ... This deal has a long way to go,” Mr. Doyle said.

“$170, that’s crazy.”

Newsflash, Mr. Doyle.....

What is a company "worth"? What anyone is willing to pay for it - nothing more, nothing less. And right now that is $130 a share.

Sun, 10/10/2010 - 17:03 | 639744 Sudden Debt

just watch Apple and google :)

2 airfactory's worth as much as a small country!

Bubble? NOOOO!!!

Sun, 10/10/2010 - 16:36 | 639691 qussl3

Temasek hasnt exactly been know to make good investments, all the better for Potash I suppose.

Teachers, Singapore Bidding on Potash

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