PotashCorp Rejects BHP Billiton’s Offer

PotashCorp’s Board of Directors, after careful consideration with the assistance of its independent financial and legal advisors, voted unanimously to reject the unsolicited offer by BHP Billiton Development 2 (Canada) Ltd., an indirect wholly-owned subsidiary of BHP Billiton Plc, to acquire all of the outstanding shares of PotashCorp for US$130 per share in cash. The Board unanimously recommends that PotashCorp shareholders reject the BHP Billiton offer and not tender their shares.

The basis for the PotashCorp Board’s recommendation with respect to the BHP Billiton offer is set forth in PotashCorp’s Directors’ Circular and Schedule 14D-9, which were filed today with the Canadian and U.S. securities regulatory authorities and are being mailed to shareholders.

“The PotashCorp Board of Directors is unanimous in its belief that the BHP Billiton offer substantially undervalues PotashCorp and fails to reflect both the value of our premier position in a strategically vital industry and our unparalleled future growth prospects,” says PotashCorp president and CEO Bill Doyle. “The Board thoroughly reviewed the formal offer documents in connection with BHP Billiton’s unsolicited offer and concluded that the offer is wholly inadequate and is not in the best interests of the Company, its shareholders or other stakeholders. We strongly urge shareholders to reject BHP Billiton’s opportunistic offer and not tender their shares.”

The reasons for the PotashCorp Board’s recommendation to reject BHP Billiton’s offer are detailed in the Directors’ Circular and the Schedule 14D-9, and include, among other things, the Board’s belief that:

  • PotashCorp is a uniquely valuable asset. The PotashCorp Board believes that the Company is uniquely positioned as the premier global potash producer with unparalleled assets in an industry where supply is characterized by substantial barriers to entry, few producers, low government ownership and no known product substitutes. At the same time, demand-side drivers are strong and irrefutable. The Company believes that PotashCorp is uniquely positioned to benefit from these dynamics and that the BHP Billiton offer fails to adequately compensate Shareholders for this strategic position and scarcity value. In addition, PotashCorp believes that the BHP Billiton offer does not reflect PotashCorp’s substantial recent and ongoing investments to increase capacity, the value of PotashCorp’s strategic equity investments in China, Chile, Jordan and Israel and PotashCorp’s unmatched ability to meet the needs of North American customers and growing offshore potash markets.
  • The BHP Billiton offer fails to reflect PotashCorp’s prospects for continued growth and shareholder value creation. PotashCorp is poised to deliver strong earnings growth as agricultural fundamentals continue to strengthen and demand for its products rises. The Company believes that the potash market is approaching an inflection point, characterized by increasing global demand for potash and higher prices. Along with its significant portfolio of high-quality, low-cost assets in Canada, its strategic investments in other potash businesses uniquely position PotashCorp to capture a disproportionate share of demand and earnings growth in the coming years. PotashCorp’s Board and management team are highly confident that the Company can continue its strong track record of success, realize upon the growth opportunities available to it in the current market environment, and deliver more value to shareholders than the inadequate BHP Billiton offer.
  • The BHP Billiton offer is timed to deprive shareholders of full value. The PotashCorp Board believes that the timing of the BHP Billiton offer is highly opportunistic, that it represents an ill-disguised attempt to exploit an anomaly in the equity market valuation of PotashCorp and that BHP Billiton is opportunistically attempting to transfer the upside value in PotashCorp to its own shareholders at the expense of PotashCorp shareholders. The Company believes that BHP intentionally launched the BHP Billiton offer just as the fertilizer industry is emerging from an unprecedented demand decline associated with the global economic downturn, in order to seize the value that PotashCorp is poised to create. PotashCorp is uniquely positioned to capitalize on growth opportunities present in its industry. Given the demand growth and margin potential anticipated in the months and years ahead, the PotashCorp Board believes that the continued execution of PotashCorp’s strategic plan will deliver substantially more value to shareholders than the BHP Billiton offer.
  • The BHP Billiton offer represents a wholly inadequate premium for control. At US$130 per share, BHP Billiton is proposing a premium of only 16% over PotashCorp’s closing stock price on August 16, 2010, the day before PotashCorp’s announcement of BHP Billiton’s unsolicited proposal. This low premium does not, in PotashCorp’s view, reflect the strategic importance, scarcity value or quality of PotashCorp’s assets, nor the unique investment opportunity PotashCorp affords to BHP Billiton or any other potential acquiror. The premium being offered is substantially inferior to control premiums paid for other marquee Canadian-based resource companies.
  • The consideration offered under the BHP Billiton offer represents a 13.1% discount to the closing price of PotashCorp common shares on August 20, 2010, the last trading day prior to filing the Directors’ Circular and Schedule 14D-9. Since the announcement of BHP Billiton’s unsolicited approach on August 17, 2010, the PotashCorp common shares have consistently traded above the offer price. PotashCorp believes that the performance of the common shares during this period is a strong indicator that the market believes that the BHP Billiton offer undervalues the common shares.
  • PotashCorp’s financial advisors have each provided a written opinion to the Board that the consideration being offered pursuant to the BHP Billiton offer was, as of the date of such opinions, inadequate, from a financial point of view, to shareholders (other than BHP Billiton and any of its affiliates). The PotashCorp Board has received written opinions dated August 22, 2010 from each of BofA Merrill Lynch, Goldman, Sachs & Co. and RBC Capital Markets to the effect that, as of such date and based upon and subject to the assumptions, limitations and qualifications stated in their respective opinions, the consideration offered by BHP Billiton under the BHP Billiton offer was inadequate, from a financial point of view, to shareholders (other than BHP Billiton and any of its affiliates). Copies of the opinions are set forth in PotashCorp’s Directors’ Circular and Schedule 14D-9.1
  • Superior offers or other alternatives are expected to emerge. Since August 12, 2010, the date that BHP Billiton first approached PotashCorp in respect of the BHP Billiton offer, the PotashCorp Board, together with PotashCorp’s management team and financial and legal advisors, have been working to evaluate a range of strategic alternatives that may enhance shareholder value. PotashCorp has been approached by, and has initiated contact with, a number of third parties who have expressed an interest in considering alternative transactions. Discussions are being pursued with several of these third parties in order to generate value enhancing alternatives.
  • The BHP Billiton offer is coercive and not a “Permitted Bid” under PotashCorp’s Shareholder Rights Plan. PotashCorp’s Shareholder Rights Plan enables potential acquirors to make a “Permitted Bid” without the approval of the PotashCorp Board. Among other things, a Permitted Bid provides the PotashCorp Board with additional time for the exploration, development and pursuit of alternatives that could enhance shareholder value. A Permitted Bid also makes it more likely that holders of common shares have sufficient time to consider all appropriate alternatives and do not feel compelled to accept a bid for fear that other shareholders would tender and they would remain as minority shareholders in a corporation with a new controlling shareholder, and with significantly less liquidity and the absence of any takeover premium. BHP Billiton was able to make a Permitted Bid as the Shareholder Rights Plan was adopted and announced, and a copy publicly filed, prior to the BHP Billiton offer being mailed, but BHP Billiton chose not to make a Permitted Bid. On August 22, 2010, the PotashCorp Board decided to defer the “separation time” of the rights under the Shareholder Rights Plan.
  • The BHP Billiton offer is highly conditional. The PotashCorp Board is concerned about the fact that the BHP Billiton offer is highly conditional, to the benefit of BHP Billiton. There are conditions which are not subject to a materiality threshold or other objective criteria but rather provide BHP Billiton with a broad range of grounds upon which it may decline to proceed with the BHP Billiton offer, with the result that the tendering of common shares to the BHP Billiton offer could, under certain circumstances, effectively constitute little more than the grant of an option to BHP Billiton to acquire common shares.

PotashCorp shareholders are urged not to tender into the BHP Billiton offer and to carefully review the Directors’ Circular and the Schedule 14D-9 in their entirety.

These documents will be available free of charge on SEDAR at www.sedar.com, on the SEC’s Web site at www.sec.gov and on PotashCorp’s Web site at www.potashcorp.com.

Leave a Reply

Fertilizer Stories

Aerial view of the West Fertilizer explosion site
FertilizerFertilizer Companies Blame City For West, TX, Explosion
August 6, 2014
El Dorado Chemical Co. and CF Industries contend the city failed to properly train the first responders and had insufficient protocols in place to battle the April 17, 2013, blaze at West Fertilizer Co. that triggered the explosion. Read More
FertilizerThe Fertilizer Institute: New President, Renewed Energy
February 3, 2014
Chris Jahn relishes the opportunity to lead the organization through the challenging times ahead. Read More
FertilizerA New Cycle For Fertilizer Demand
January 2, 2014
Changes in the corn market could have a major impact on the crop nutrients sector in 2014, say experts. Read More
FertilizerOSHA Hammers West Fertilizer With Over $100K In Fines For April Explosion
October 10, 2013
The Occupational Safety and Health Administration is fining the parent company of the West Fertilizer plant, Adair Grain Inc., $118,300 for 24 violations. Read More

Trending Articles

EquipmentAdvance Your Technology IQ At MAGIE
August 13, 2014
The Midwest AG Industries Exposition (August 20-21) is the place you need to be to see, study and evaluate how new advances in the equipment, operations, crop protection and fertility sectors can help your business prosper. Read More
HerbicidesScouting Key To Next Season’s Soybean Herbicide Program
August 12, 2014
When growing soybeans, growers need to think ahead to stay one step ahead of weeds. That means examining weed threats and evaluating which herbicides work best. Read More
StewardshipMichigan Agriculture Leaders On Toledo Water Ban: We Want To Be Part Of The Conversation
August 8, 2014
Leaders of Michigan agricultural organizations said Thursday that the government should not have a “knee-jerk reaction” based on last weekend’s water ban in Toledo due to fertilizer run-off in Lake Erie. Read More
CropLife 100BRANDT Acquires Lemon Ag Services
August 4, 2014
The acquisition of Lemon Ag fits BRANDT’s aggressive corporate strategy of providing superior agronomic advice and services for customers in central Illinois. Read More
Eric SfiligojThe Resurgence Of Crop Protection
August 4, 2014
Plenty of new offerings over the next few years should see a rebirth for the crop protection products category in terms of market share. Read More
LegislationUSDA Implements Key Farm Bill Crop Insurance Provision
July 30, 2014
The new Supplemental Coverage Option, available through the federal crop insurance program and set to begin with the 2015 crop year, is designed to help protect producers from yield and market volatility. Read More

Latest News

SprayersUniversity Of Illinois Introduces New Spray App
August 18, 2014
University of Illinois Extension has released a new smartphone app for making sprayer-related calculations. Pesticide Spray Calculator, or Spray Calc, Read More
Crop InputsSyngenta Names New Manager Of Federal Government Relati…
August 18, 2014
Laura Wood Peterson has joined Syngenta as manager of federal government relations, based in Washington, DC. Read More
ManagementExpert To Discuss Farmland Value, Rent At Farm Science …
August 18, 2014
While cropland values in Ohio increased in the past two years, they have remained flat in 2014, declining in some cases, according to an Ohio State University agricultural economist. Read More
EquipmentDeere Announces Factory Layoffs
August 18, 2014
Deere & Co. has announced it will reduce the size of its manufacturing workforce at some agricultural equipment factories in response to current market demand for its products. Read More
HerbicidesNew DuPont Afforia Herbicide Gives Crops A Clean Start
August 18, 2014
DuPont Afforia is a preplant herbicide for soybeans and other field crops that provides excellent burndown and residual control of many challenging weeds, such as marestail and waterhemp. Read More
Equipment21 Products Showcased At MAGIE 2014
August 18, 2014
The annual Midwest AG Industries Exposition is upon us. Here is CropLife IRON's look at some of the products visitors can expect to see at this week's event. Read More
EquipmentAGCO Seeks Nominations For 2014 Operator Of The Year
August 15, 2014
Ag retailers throughout the U.S. and Canada are encouraged to nominate their best applicators. Read More
EquipmentAdvance Your Technology IQ At MAGIE
August 13, 2014
The Midwest AG Industries Exposition (August 20-21) is the place you need to be to see, study and evaluate how new advances in the equipment, operations, crop protection and fertility sectors can help your business prosper. Read More
ManagementCropLife’s Buyers’ Guide Issue Now Availabl…
August 13, 2014
One of our most read issues of the year — the August Buyers' Guide — is ready to download on the iPad. This popular issue features equipment for "In The Field," "At The Plant" and "In The Office." Read More
WebinarsWebinars On Demand
August 13, 2014
Register for one of our upcoming Webinars or access our archive of past Webinars to view recordings of presentations that may be of interest to you. Read More
HerbicidesBASF: Fall Burndown Benefits Go Beyond Weed Control
August 12, 2014
While unpredictable weather may delay application timing of spring herbicides, more growers are adding a burndown application in the fall Read More
HerbicidesScouting Key To Next Season’s Soybean Herbicide P…
August 12, 2014
When growing soybeans, growers need to think ahead to stay one step ahead of weeds. That means examining weed threats and evaluating which herbicides work best. Read More
StewardshipNitrogen Efficiency Supports Environmental Stewardship
August 12, 2014
As growers prepare for another harvest, it’s important to consider how nitrogen stabilization not only supports healthy plant growth but also fosters environmental stewardship. Read More
Seed/BiotechMycogen Seeds Introduces 19 New Corn Hybrids For 2015
August 12, 2014
Many of the new hybrids feature Mycogen's SmartStax Refuge Advanced technology for maximum protection of the genetic potential and planting convenience. Read More
HerbicidesDow AgroSciences Introduces Enlist Ahead App For Enlist…
August 12, 2014
Designed for use with the Enlist Weed Control System, the app is a precision agriculture tool for maximizing weed control performance, managing weed resistance and making responsible applications of Enlist Duo herbicide with Colex-D Technology. Read More
CropLife 100CHS Announces Senior Leadership Team Changes
August 12, 2014
Current CHS strategic leadership team member Shirley Cunningham will assume a new role as executive vice president and chief operating officer, Ag Business and Enterprise Strategy. Read More
ManagementFormulation Chemist Enhances Capabilities For AgriThori…
August 11, 2014
AgriThority has added accomplished formulation chemist Roy Chen to its team of associates supporting new and emerging biotechnologies and conventional chemistries. Read More
Crop InputsPurdue Creating Center To Support Soybean ‘Value …
August 8, 2014
Purdue University is establishing a center that will combine the broad-based expertise of dozens of faculty and staff members coordinating research, Extension and education to advance the production and use of soybeans. Read More