The Conversation (0)
Today is a crucial day for BHP Billiton’s (NYSE:BHP) bid for Potash Corporation of Saskatchewan (NYSE:POT). After market closing, it is reported that Canada’s Industry Minister Tony Clement will announce the federal government’s ruling on whether or not they will allow the bid.
By Leia Michele Toovey-Exclusive to Potash Investing News
Provincial politicians have already sounded off on their extreme opposition to the proposed acquisition. While in limbo for the federal government’s decision, Saskatchewan Premier Brad Wall claimed that if the federal government approves the bid, the province will seek legal action.
For investors who are keen to learn about the Canadian government’s decision, chances are the news will come first from BHP because the federal government will first announce their decision to BHP before they release it to the public.
According to court documents, BHP Billiton has been looking into a takeover bid for Potash Corp since 2006. Before he was chief executive officer of BHP, Marius Kloppers recommended internally that BHP could buy Potash Corp. for $13 billion. He revisited the proposal after taking the helm at BHP, and failing to takeover Rio Tinto.
Since the news broke over BHP’s hostile bid Potash Corporation of Saskatchewan has reassured investors that the company would receive alternate bids, potentially blocking BHP’s low-ball offer. While none of these bids have come to fruition, the rumours have persisted. It is possible that these alternate buyers are holding their breath until the federal government announcement. If this is true, we could expect a competing offer (pending approval) in the following days.
Apparently, Russia asked local fertilizer makers to consider a joint bid for Potash Corp., countering BHP’S $40 billion offer. Russian fertilizer group Acron told the government it wouldn’t join the plan after receiving a letter from the Industry and Trade Ministry on Nov. 1 proposing a combined bid, said Chairman Alexander Popov. “It’s absolutely senseless for Russia to spend $40 billion on acquiring Potash Corp. “If the country has a spare $40 billion, it would be much more effective to put it into the Russian economy.”
Phosphate News
While potash is receiving all the limelight, its lesser known cousin, phosphate, may be headed for larger gains. Phosphate is as indispensible as a fertilizer component as potash, however supplies are expected to run-out long before potash. Fertilizer industry analysts have sounded the alarm over tight market fundamentals, claiming that a global shortfall of high-grade phosphate looms on the horizon.
Backing up this proclamation, BHP Billiton said that they will divest certain Potash Corporation of Saskatchewan interests, if their bid goes through. They will, however, hold on to the company’s phosphate assets. A BHP spokesperson claimed that these assets would “fit well” in the diversified mining company.
State-owned Indonesian fertilizer companies today signed a $900 million deal with Pupuk Sriwijaya (Pusri) and Pupuk Kaltim (PKT) to enter into a joint venture with Jordan Phosphate Mines to build three fertilizer factories in Indonesia. The factories will each have a capacity of one million metric tons of NPK (nitrogen, phosphorous and potassium) fertilizer each year.
Mosaic (NYSE:MOS), the world’s biggest phosphate producer, could temporarily reopen an idled Florida phosphate mine under an agreement it has reached with environmental groups that opposed the mine’s expansion. The mine, a key component to Mosaic’s phosphate fertilizer production, shut-down in early September after a federal judge ruled expansion of the mine would likely violate the federal Clean Water Act. The fertilizer company announced today that it had won a temporary agreement with the three environmental groups who had earlier opposed the mine’s development. In order to come to this deal, a compromise was made. In return for permission to recommence mining activities on the 200 acres of contested land, Mosaic will leave 40 acres untouched, most of which will be set aside as a conservation area. As the news broke, Equities research analysts at Barclays PLC (NYSE: BCS) boosted their earnings per share estimates on shares of Mosaic in a research note to investors on Monday. They now have the fertilize producer listed with a price target of $69.00 and an “equal weight” rating.