Australian mining giant BHP Billiton today made a hostile takeover offer of USD 40 billion for the world’s largest fertiliser producer Potash Corporation of Saskatchewan Inc,a day after the Canadian major rejected the bid.
The all-cash takeover bid,if successful,would mark the entry of BHP Billiton into the fast growing fertiliser industry as well as help the company become a leading miner of potash.
BHP Billiton has offered to buy PotashCorp shares at a price of USD 130 per piece. “The offer values the total equity of PotashCorp at approximately USD 40 billion on a fully diluted basis,” the Australian firm said in a statement.
On Tuesday,PotashCorp’s board had outrightly rejected the buyout offer,asserting the proposal “substantially undervalues” the company. The offer was first made on August 12.
The global fertiliser industry is witnessing signs of consolidation in the backdrop of growing population,which has increased food needs. This scenario is further pushing up the demand for fertilisers.
The USD 130 per share offer represents a premium of 20 per cent to the closing price of PotashCorp’s shares on the New York Stock Exchange on August 11.
Pointing out that the bid is highly beneficial for the PotashCorp’s shareholders,BHP Billiton noted the offer would provide immediate liquidity as well as certainty of value regarding the Canadian firm’s growth potential in the face of volatile equity markets.
PotashCorp is the world’s largest fertiliser enterprise in terms of capacity and produces industrial chemicals,agriculture and animal nutrition products.
“We firmly believe that PotashCorp shareholders will find the certainty of a cash offer… very attractive and we have therefore decided to make this offer directly to those shareholders,” BHP Billiton Chairman Jac Nasser said.
Yesterday,PotashCorp had said the proposal is grossly inadequate and it is not in the best interests of shareholders for the company to enter into discussions with BHP Billiton.
“The fertiliser industry is emerging from the recent global economic downturn and we feel strongly that PotashCorp shareholders should benefit from current and potential value of the company,” PotashCorp Chairman Dallas J Howe had noted.
BHP Billiton is a diversified group with interests in aluminium,base metals,iron ore and petroleum sector,among others.