BHP BILLITON came under further pressure to increase its $39bn (£24.7bn) bid for Potash Corp yesterday, as a hedge fund and several analysts spoke out on the likelihood of the deal’s success.
Sources familiar with the firm said BHP Billiton was unlikely to raise its $130 a share offer until it had cleared regulatory hurdles in Canada, where Potash is based.
However French hedge fund Bernheim Dreyfus, which has a small holding in Potash, said yesterday other shareholders expect a sweetened offer soon afterwards.
“It’s not easy to see what price shareholders will accept, but we have spoken to others and think $160 a share would get the deal done,” said Lionel Melka, co-manager of Bernheim’s Diva-Synergy fund.
Melka said he expects the Canadian government to clear the deal by its deadline tomorrow. “They have to see what is going to be a benefit for Canada, though we understand they have leverage and will ask for jobs and tax commitments,” he added.
Politicians including Brad Wall, premier of the Saskatchewan province where Potash is based, have warned against the deal, arguing it would damage the country’s jobs market and tax income.
Meanwhile, analysts at UBS said BHP could pay up to $165 a share to take over the company. The analysts also said in a note that BHP could start a $10bn share buyback scheme if its purchase of Potash falls through.
Potash chief executive Bill Doyle continues to talk of a fair value offer of $170 to $190 a share.
FAST FACTS | BHP BILLITON & POTASH
BHP is the world’s largest diversified mining company and is listed on the FTSE 100.
Potash Corp is the world’s largest producer of potash fertiliser. It posted quarterly pre-tax profit of $402.7m last week.
TIMELINE | BHP’S HURDLES
Deadline for Canada’s federal government to decide whether the takeover would provide a “net benefit” for the country. If the minority Conservative government rejects the deal, BHP can submit an amended proposal, but after months of negotiations to reach the current guise, this seems unlikely. Local politicians have already voiced their objections to the deal.
If Canada gives the green light, the firms will then face off in the Chicago district court. Potash is attempting to block BHP from closing its tender offer, claiming the firm misled investors. Given the takeover is taking place chiefly under Canadian law, it is unlikely the US courts will intervene.
8 - 9 November
The securities regulator in Saskatchewan province, where Potash is based, will rule on Potash’s “poison pill” defence. BHP has asked the watchdog to suspend trading in Potash’s new shares, which were issued in August to obstruct BHP’s takeover efforts.
The Canadian Competition Bureau is due to rule on any anti-trust issues. However, the Canadian government is likely to have already identified and dealt with similar concerns.
Deadline for Potash shareholders to accept BHP’s current $130 a share offer. Several bystanders expect BHP to increase its bid shortly before this expiry date.