CANADIAN fertiliser firm PotashCorp yesterday snubbed a mammoth $39bn (£25bn) indicative offer from mining giant BHP Billiton, moving swiftly to shield itself by invoking a “poison pill” defence outlawed in the UK.
PotashCorp, which described the $130-a-share cash offer from BHP as “grossly inadequate”, launched a shareholder rights plan defence, giving it the ability to issue new shares to existing shareholders for a pittance if its suitor builds up a stake of over 20 per cent in the open market.
The move will force BHP to go hostile without being able to first snap up a sizeable stake, if it is committed to launching a formal bid at the current price.
BHP’s senior management in the UK and Australia were last night locked in discussions over how to proceed with its offer.
However, they are unlikely to be able to bring PotashCorp’s directors on board without stumping up a considerable amount of extra cash, after sources close to the Canadian firm yesterday indicated that the rejected offer was “not even in the right ball park”.
In its rebuttal, PotashCorp, headed by chief executive officer Bill Doyle, said the $130-a-share offer “fails to reflect both the value of our premier position in a strategically vital industry and our unparalleled future growth prospects”.
The company’s so-called shareholder rights plan as a defence, though not allowed in the UK, is common in Canada among firms protecting themselves against hostile suitors.
The last high-profile instance of such a poison pill defence being implemented was last month, when independent Hollywood studio Lions Gate Entertainment imposed a 38 per cent trigger on the shareholding of billionaire bidder Carl Icahn.
BHP Billiton’s chairman Jac Nasser wrote to his PotashCorp counterpart Dallas Howe on Friday to outline the indicative proposal, which he argued reflected a 20 per cent premium to the target’s closing price on the New York Stock Exchange last Wednesday. But PotashCorp’s shares soared to well above the $140 level yesterday, suggesting investors believe that an improved offer could be imminent.
BHP demonstrated its commitment to building up a strong position in the potash industry earlier this year with the C$341m (£212.1m) acquisition of Athabasca Potash, a Toronto Stock Exchange-listed company with assets in the Saskatchewan province of Canada, where PotashCorp is also based.