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
FertilizerFall Fertility 2014: Forecasting Fertilizer Use
September 7, 2014
Great crops this year have tapped the soil, and fall work is definitely called for, but how challenging will that get? Read More
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
Top 100 Articles
Growmark Group
CropLife 100GROWMARK In 2015: Back, To The Future
March 2, 2015
The nation’s third largest ag retail organization is simultaneously moving forward while remembering its past. Read More
CropLife 100Pinnacle Expands Sanders Brand In The South
February 27, 2015
Pinnacle has acquired Hopkins Seed and Chemical in Qulin, MO, which expands the company's Sanders brand to nine Southern states. Read More
CropLife 100Pinnacle Launches New Providence Agriculture Location In Indiana
February 27, 2015
Pinnacle Agriculture Holdings — ranked No. 6 on the CropLife 100 — has established a new retail location in New Castle, IN, which will operate as part of Pinnacle's Providence Agriculture brand. Read More
CropLife 100Cooperative CHS Returns $518 Million To Owners
February 23, 2015
The 2015 cash return to owners is based on CHS net income of $1.1 billion, the company's second highest on record. Read More
corn field
CropLife 100The Andersons’ Humic DG Now Available In Canada
February 13, 2015
The Andersons, Inc. Turf & Specialty Group has announced its Humic DG product is now available to customers in the Canadian turf, agriculture and horticulture markets. Read More
Farmer on tablet
CropLife 100Southern States Co-op: An Inside Look At Our Aerial Imagery Program
February 8, 2015
Now is as good a time as any to explore the basics of what a retail aerial imagery program looks like today. Read More
Latest News
Enlist spray Demo
HerbicidesGuiding New Herbicide Systems’ Launches
March 3, 2015
Under careful watch, the new 2,4-D- and dicamba-tolerant crops hit more acres this season. Read More
Eric SfiligojCommodity Classic 2015: Playing The Waiting Game
March 2, 2015
There was plenty of future-talk at this year’s event as companies (and growers) are largely in a holding pattern of sorts. Read More
Industry NewsHighway Equipment Appoints New Director Of Business Dev…
March 2, 2015
Cory Venable, who joined Highway Equipment Company (HECO) in 2013 as OEM Account Manager, has been promoted to Director of Business Development. Read More
Prairieland FS employees
Eric SfiligojWorkforce Worries
March 2, 2015
Finding good employees almost always ranks as the No. 1 or No. 2 problem for ag retailers in our annual CropLife 100 survey. Read More
Growmark Group
CropLife 100GROWMARK In 2015: Back, To The Future
March 2, 2015
The nation’s third largest ag retail organization is simultaneously moving forward while remembering its past. Read More
CropLife 100Pinnacle Expands Sanders Brand In The South
February 27, 2015
Pinnacle has acquired Hopkins Seed and Chemical in Qulin, MO, which expands the company's Sanders brand to nine Southern states. Read More
CropLife 100Pinnacle Launches New Providence Agriculture Location I…
February 27, 2015
Pinnacle Agriculture Holdings — ranked No. 6 on the CropLife 100 — has established a new retail location in New Castle, IN, which will operate as part of Pinnacle's Providence Agriculture brand. Read More
2,4-D Celebrates 70 Years; GROWMARK Uses Super Bowl Ad To Share Positive Message
Management2,4-D Celebrates 70 Years; GROWMARK Uses Super Bowl Ad …
February 27, 2015
Jim Gray, executive director of the 2,4-D Research Task Force, lays out planned activities to mark the chemistry’s 70th anniversary. Read More
HerbicidesUniversity Of Arkansas Flag The Technology Program Adds…
February 27, 2015
Started in 2010, the Flag the Technology program provides a visual reference for applicators to distinguish between fields planted with different herbicide-tolerant trait technologies. Read More
Luckey Farmers, Inc.’s Berkey Farm Center
Industry NewsLuckey Farmers’ Berkey Branch Certified In 4R Nut…
February 26, 2015
The 4R Nutrient Stewardship Certification Program has announced Luckey Farmers Inc.’s Berkey Farm Center in northwest Ohio has been added to its growing list of nutrient service providers to achieve certified status. Read More
Crop InputsWinField Unveiling NutriVision Technology, Ascend Dry F…
February 24, 2015
New for 2015 are NutriVision Technology, a unique tool for monitoring in-season plant nutrient availability, and Ascend WSG plant growth regulator, a new dry formulation of Ascend plant growth regulator. Read More
FertilizerNew Formulation Of NutriSphere-N Protects High Volume U…
February 24, 2015
Verdesian Life Sciences is launching NutriSphere-N HVTM, a new polymer formulation of the proven NutriSphere-N Nitrogen Fertilizer Manager that protects high-volume applications of UAN. Read More
EquipmentIowa Ag Secretary Northey Names Hagie Water Quality Lea…
February 24, 2015
Iowa Secretary of Agriculture Bill Northey has named Hagie Mfg. as a recipient of the Secretary’s Water Quality Initiative (WQI) Leader Award. Read More
FungicidesEvito Fungicide Gives Canadian Wheat Growers New Diseas…
February 24, 2015
EVITO fungicide from Arysta LifeScience North America gives Canadian wheat and barley growers a new option for disease control. Read More
Eric SfiligojThe Commodity Classic Turns 20
February 23, 2015
Two decades in, this annual gathering of all things agriculture has become a must-see event. Read More
CropLife 100Cooperative CHS Returns $518 Million To Owners
February 23, 2015
The 2015 cash return to owners is based on CHS net income of $1.1 billion, the company's second highest on record. Read More
CropLife Retail Week: On The Road Edition
ManagementCropLife Retail Week: On The Road Edition
February 20, 2015
Editors Paul Schrimpf and Eric Sfiligoj discuss their recent trips to the National Farm Machinery Show in Louisville and the Read More
Crop InputsLand O’Lakes Acquires FLM+ Assets
February 19, 2015
FLM+ will become a wholly owned subsidiary of Land O'Lakes, Inc., and the company will retain its employee base after closing of the deal, which is scheduled for the second quarter of the year. Read More