SH chief executive Bill Doyle stands to make more than $400m (£257m) from the firm’s sale to mining giant BHP Billiton if the controversial takeover goes ahead, as BHP ramps up its efforts to persuade its shareholders a $40bn hostile bid is worthwhile.
Doyle, head of the Canadian fertiliser firm, could make even more if he holds his nerve against the British-listed miner, whose friendly offer of $130 a share he called “a steal of the company” earlier in the week.
Doyle owns just under half a million common shares worth $60.8m at the current offer price, according to company documents, with options on a further 3.4m that vary in value, which can be cashed in if the firm is taken over.
BHP will next week begin the hard sell of its hostile bid for Potash to its own investors at roadshows across the globe, as the threat of a credit ratings downgrade hangs over the offer process.
Standard & Poor’s (S&P) yesterday became the second ratings agency to wade into the fray, warning that it had placed BHP’s A+ credit rating on watch with negative implications.
“We would likely lower the ratings on BHP Billiton by one notch to ‘A’ if the acquisition proceeds at the current offer price and if BHP Billiton’s capital spending program is not moderated,” S&P analyst Craig Parker said.
Moody’s has already put its own rating for BHP on review for downgrade.
BHP, which will release its official offer document today, will next week use its full-year results to try and persuade shareholders of the rationale for a deal, at roadshows in London, Sydney and New York.
Of concern to investors is the price at which the firm can borrow to fund the acquisition, after chief executive Marius Kloppers warned the interest rate would be less competitive than BHP has enjoyed in the past.
BHP is also widely expected to up its offer to secure the deal, given the likely emergence of a rival bidder. Brazil’s Vale is widely tipped to look at a white knight offer, as are Russian and Chinese firms. Rio Tinto, with which BHP failed to secure a tie-up two years ago, may also bid, though its appetite for a large deal could be tempered by its $38.1bn takeover of Alcan in 2007.
“BHP has the financial muscle to pay more,” said Ambrian analyst Peter Davey yesterday. “Depending on borrowing costs, it could go to $165/$170 a share without the deal becoming dilutive to earnings, though then it could become tricky to get its own shareholders on board.”