Now that an unexpected factor offers support to Potash Corp. (NYSE:POT), BHP (NYSE:BHP) may have to rethink their bid of $130 a share for the company as rising grain prices have changed the game since that time.
Interesting that the market is now driving the value of Potash and other fertilizer and agricultural companies.
The good news for BHP, if they view it that way, is the added value of Potash, if they are approved for and win the company, is they will inherit a company whose intrinsic value is higher for a reason, and not because Potash executives pointed to a mythical period down the road when it would happen.
Now you've got the debt issue on the plate for BHP as well. But the higher value of Potash should help ease that, even it it's different from the original intent of the company.
Another major change from the higher price of grains is the attitude of Potash shareholders, who seemed poised to accept the deal, but now probably will consider $130 a share far too little.
Of course things change quickly in the volatile agriculture sector as far as prices go. The trend for corn, and by extension, soybeans and wheat, has been going up for months, and the lower corn and soybean yields should support that trend for awhile.
That means if BHP continues to pursue Potash, those prices will remain in place during the time of negotiations and due diligence. It looks like BHP will no longer come close to the $130 price if they want to land Potash.
1 comment:
Potash shareholders were never as your article suggests, prepared to accept an off of $130.00. Ever before the recent rise in corn, beans & wheat the $130 bid was a joke. I would like to see the percentage that tendered into the $130 bid. I'm quite certain it would confirm this author's presumtion is without merit.
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