PotashCorp sues BHP over hostile offer

CANADIAN fertiliser firm PotashCorp yesterday buttressed its defences against BHP Billiton’s hostile $39bn (£24.9bn) bid, filing a lawsuit against the miner in an Illinois federal court.

The suit came as BHP’s chief executive Marius Kloppers faced the scrutiny of investors over his $11.3m paycheque for the past financial year – a 9 per cent increase on the previous year. The firm’s annual report showed Kloppers received a $2m salary, $2.3m cash bonus and almost $7m in short and long term equity awards.

PotashCorp’s legal action, which seeks to block the bid and win an unspecified amount in relief payments, accuses BHP of concealing a longstanding interest in making the acquisition and feeding the market misleading information on its own intention to enter the potash industry as a new competitor. That strategy, the lawsuit contends, drove down potash prices, allowing BHP to make its offer at a “low-ball” level at which it would not have to first gain approval from its own shareholders.

Under UK law, a bidder must put its offer to a shareholder vote if the intended deal exceeds 25 per cent of its own market capitalisation. Based on BHP’s closing price on 19 August, the day before the offer emerged, the bid represented almost 23 per cent of the company’s market cap.

“BHP’s announcements were strategically timed, intended to colour investors’ views of the future for PotashCorp, and designed to raise the spectre that BHP was the 800-pound gorilla about to become a major competitor of PotashCorp,” the suit states.

BHP insisted its $130-a-share offer would not be delayed, adding: “We believe this lawsuit is entirely without merit and will contest it vigorously.”
No counter-bids have yet emerged, though China’s Sinochem is said to have engaged Deutsche Bank and Citi to advise it on a potential offer.