BHP goes hostile with Potash offer

BHP Billiton Ltd has bypassed its takeover target's board, going directly to
shareholders of Potash Corporation of Saskatchewan with its all-cash $US40 billion
($A44.18 billion) offer.
BHP Billiton also said that it does not plan any asset sales to fund the all-debt
deal, while ratings agency Moody's Investor Services said the miner's credit rating
would be under threat if the company made a formal offer for PotashCorp.
BHP Billiton late on Tuesday night revealed it had approached PotashCorp but the
Canadian company had not agreed to engage in talks.
The offer is $US130 ($A144.09) per share, which has been swiftly rejected by the
target's board as "grossly inadequate".
BHP Billiton announced after the Australian share market closed on Wednesday that it
had gone directly to PotashCorp shareholders.
"Notwithstanding PotashCorp's current position, BHP Billiton would welcome the
opportunity to work with PotashCorp to achieve a successful outcome to this
transaction," BHP Billiton said in a statement on Wednesday.
"We firmly believe that PotashCorp shareholders will find the certainty of a cash
offer, at a premium of 32 per cent to the 30 trading day period average, very
attractive and we have therefore decided to make this offer directly to those
shareholders," BHP Billiton chairman Jacques Nasser said in the statement.
BHP Billiton chief executive Marius Kloppers said during a briefing on Wednesday
that the mining giant had sought a cooperative agreement with PotashCorp via a
scheme of arrangement.
"But with PotashCorp having rejected - and with us being very serious that this is
an opportunity that fits our company, that these assets do fit our portfolio, and
that this is an opportunity for the PotashCorp shareholders to firm up value in a
very definitive way - we wanted to ... put that to the shareholders."
BHP Billiton said PotashCorp would provide it with "an immediate leadership platform
in the global fertiliser industry" and diversify its portfolio of large, low-cost,
long-life, expandable, export-oriented assets.
"It accelerates our stated strategy of becoming a leading global potash producer and
further diversifies our portfolio by commodity, geography and customer," Mr Kloppers
said in the statement.
He told the briefing the planned acquisition was based on BHP Billiton's belief in
the potash sector's strong long-term industry fundamentals, underpinned by growing
population and decreasing arable land.
Mr Kloppers told the briefing that BHP Billiton would maintain its credit rating
despite the deal being all debt.
He said BHP Billiton believed the offer was fair and full, and did not plan asset
sales to pay for the deal.
"Our funding is in no way contingent on selling assets," he said.
"What I hope to do is own the entire business with the facilities that we've put in
place."
BHP Billiton estimates the total amount of funds required to complete the offer is
about $US43 billion ($A47.49 billion), including funds required to repay or
refinance existing Potash debts if necessary.
"BHP Billiton has arranged a new multi-currency term and revolving facility
agreement entered into for the purpose, among other things, of meeting the funding
requirements of the transaction," the company said.
If the bid is successful, BHP Billiton plans to base the president and management of
the Canadian potash operations in Saskatchewan.
It also intends to identify and propose a Canadian nominee to stand for election to
the BHP Billiton board.
BHP Billiton said the proposed acquisition would be earnings per share accretive in
the second full fiscal year following consolidation.
BHP Billiton had not yet received any reaction from the target's shareholders, Mr
Kloppers said.