Business

Canadian fertiliser producer Potash Corp of Saskatchewan Inc said on Tuesday it has rejected an unsolicited takeover bid from BHP Billiton Limited, worth about US$38.49 billion, as "grossly inadequate."

The Potash board also adopted a shareholder rights plan, known as a poison pill, to prevent any entity from buying up more than a 20 per cent stake, in a move to buy time to better develop other alternatives itself.

BHP Billiton, an Australian natural resources company, is offering to buy Potash for US$130 per share, a 16 per cent premium to the stock's closing price Monday.

Shares of Potash surged above the bid price in midday trading, indicating that investors expect to garner a higher offer.

The stock rose US$28.14, or 25 per cent, to US$140.29.

Potash executives had strong words for BHP in a conference call with analysts on Tuesday.

The company said it "believes the timing of the proposal is highly opportunistic and an ill-disguised attempt" to drive up Potash's share price before coming in with a higher offer.

"I am not saying that we are opposed to a sale, but what I am saying is we are opposed to a steal of the company," President and CEO Bill Doyle said.

Potash said the timing of the offer is particularly troubling considering it believes its stock is still undervalued, as the fertiliser industry has only begun to emerge from the economic downturn.

Also, recent industry consolidation and Agrium's bid for Australian grain producer AWB earlier this week "demonstrate the opportunity that major industry players see in the agricultural space and are anxious to capitalise on."

Fertiliser company Agrium late Sunday offered more than US$1 billion for AWB in an attempt to swipe the company from rival suitor GrainCorp Ltd.

Takeover attempt lost

Agrium lost its hostile takeover attempt for fertiliser producer CF Industries earlier this year, and officially dropped its US$5.5-billion bid in March.

CF acquired Terra Industries for US$4.7 billion the following month, creating one of the world's largest fertiliser companies.

Large agribusinesses are aggressively attempting to bulk up so that they can compete with industry giants like Cargill.

On Tuesday, Cargill reported net income of US$2.6 billion on revenue of US$107.9 billion for the year ended in June, as ingredient costs fell and consumer demand began to strengthen.

Potash consumption has been growing over the past decade because of greater demand for fertiliser from developing nations.

Potash is any of several compounds containing potassium, used chiefly in fertilisers. Its main markets are China, the US, Brazil and India.

Last month, Potash Corp reported its second-quarter net income more than doubled to US$472 million, or US$1.55 per share, as revenue surged 68 per cent to US$1.44 billion.

BHP Billiton confirmed it has approached the Canadian company, and said Potash's board has not yet agreed to engage in discussions. BHP said it continues to review its options.

Its US-listed shares fell US$1.51, or 2 per cent, to US$70.43 in morning trading.

BHP has been ramping up its potash-mining business in Canada for the past four years. It holds exploration permits for over 7,338 square kilometres in Saskatchewan, where its best prospect so far - the "Jansen Project" - is expected to begin producing potash from 2015.

BHP bought out its Anglo Potash Limited joint venture in Canada for US$282 million in 2008 and purchased Athabasca Potash Inc earlier this year for about US$320 million, extending its potential exploration acreage in Canada to over 14,000 kilometres.

The mining giant has said it sees potash as a relatively low-cost business that offers it significant growth.

- AP