Potash rejects BHP Billiton bid and seeks offers

Potash Corporation today rejected BHP Billiton's $39 billion (£25 billion) takeover approach, saying it is in talks with "a number of third parties" about a white knight offer to trump the mining giant's bid.

Potash, the world's biggest fertiliser company, said its board had unanimously rejected BHP's "opportunistic" $130-a-share deal because it "substantially undervalued" the firm.

Chief executive Bill Doyle added: "The offer is wholly inadequate and is not in the best interests of the company. We strongly urge shareholders to reject BHP Billiton's opportunistic offer and not tender their shares."

After industry insiders revealed China's Sinochem and Brazil's Vale had been in talks with Potash, the Canadian firm said: "Superior offers or other alternatives are expected to emerge."

Potash, which has hired bankers from Goldman Sachs, RBC Capital Markets and Bank of America-Merrill Lynch for advice, added it had "been approached by, and has initiated contact with, a number of third parties" over the past week and a half, since BHP approached it with an offer.

In its strongly worded rebuttal of BHP's hostile bid, Potash claimed the London-listed miner had made "an ill-disguised attempt to exploit an anomaly" in its share price. It pointed out the offer was "only" 16% above its share price the day before BHP's offer was announced and said BHP was "opportunistically attempting to transfer the upside value in Potash Corp to its own shareholders at the expense of Potash Corp shareholders".

Potash shares have been trading above the offer price since BHP announced its approach on Wednesday, closing in New York on Friday at $149.67.

City analysts reckon BHP will have to up its offer to $150-$160 to woo Potash investors. They see Sinochem, the state-owned firm, as a leading contender for a counterbid. A spokesman for Sinochem has already announced it was paying "close attention" to BHP's hostile bid, since it was "interested in overseas potash investment opportunities".

Potash is in demand as agricultural experts expect fertiliser requirements to soar as farmers need increasing supplies of it to meet the world's rapidly growing demand for food, particularly animal feed.

The International Fertilizer Industry Association predicts farmers will buy 29.9 million metric tonnes this year, and expect that to rise by a fifth to 35.8 million metric tonnes over the next four years.