Citigroup (NYSE:C) said they believe a buyback of their stock by BHP (NYSE:BHP) would offer more value to shareholders then buying Potash (NYSE:POT), as it would generate more free cash flow per share.
With numbers for acquiring Potash now being thought to having to go as high as $145 a share, far above the bid now offered by BHP of $130 a share, Citigroup analysts see it being too "dilutive" for the giant mining company's shares.
Citigroup analyst Heath R. Jansen said in a note, “The optimum scenario according to our calculations is a buyback.”
Free cash flow represents the amount of cash left for the operations of a company after its capital expenditures.
Jansen added when he and his team went over the numbers, a merger of the two companies over the last decade would have resulted in a much more volatile company than without the merger.
BHP evidently isn't listening, as they've taken the approximate $40 billion cash offer directly to the shareholders of Potash.
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