Angered at what could be perceived as arrogance by the board of directors of Potash Corp. (NYSE:POT), a group of shareholders have sued the board for not taking into account their interests, and rather were serving their own interests.
In a class action lawsuit filed by Richard and Susan Painter and Herbert Francl in the U.S. District Court of Illinois, it stated:
“The board adopted the poison pill to entrench incumbent directors and management of Potash and prevent BHP (NYSE:BHP) from acquiring the company without the consent of the board.
“The individual defendants, the directors of the company, have served their own interests before those of Potash shareholders and acted oppressively and in a manner that unfairly prejudices and disregards the interests of shareholders.”
Listening to the remarks of Potash CEO Bill Doyle, and others, their remarks could come back to haunt them, as it definitely gave the appearance they weren't interested in the shareholders but their own jobs.
Since they're on record, there's a lot that could be used against them in a court case.
Most people without any skin in the game, including a report from the Conference Board of Canada, which was commissioned by the government of Saskatchewan, say over the long term it would probably be beneficial to Canada, although possibly over the first 10 years there could be up to $2 billion in royalties lost. Not much in the overall scheme of things.
There can be no doubt this would benefit the province, although that isn't a reason for the deal to go forward. Extracting all the royalties from the company to pay for socialist programs and wasteful government spending isn't what business is for.
This is about a company that likes to compete wanting to produce potash at it's own pace, and not via the Canpotex cartel which essentially fix prices, an illegal act in the U.S.
Mosaic (NYSE:MOS) and Agrium (NYSE:AGU) are the other members of the monopoly, and they work together to directly decide how much fertilizer to produce and what the price to charge should be.
The government of Saskatchewan is evidently clueless as to how turning over more potash at lower margins would create probably more revenue than keeping prices high and generating less sales.
It's the Wal-Mart (NYSE:WMT factor at work. They make so much money because they keep their costs low and turn over inventory over and over again. That creates huge profits even though they have lower margins at times.
Anyway, this was a no-brainer as far as the lawsuit. Most of the arguments attempted to be made from Potash and their leadership don't make sense, other than asserting sometime in the future they're really going to be a big company again and worth a lot more than they are.
That argument could be made by any company of course.
Bottom line. Potash has been acting arrogant and resisting the deal in a way that at minimum does give the appearance of self interest. It may cost them before it's over, as they've done nothing but throw out gigantic numbers as to what they're allegedly worth, rather than try to work things out with BHP.
5 comments:
Ellen,
How much research did you do into the three filing the lawsuit? Richard and Susan Painter and Herbert Francl only own 100 Potash Corp shares. They are most likely three Americans that are continuing the American tradition of suing people/corporations for the stupidest reasons because they want money. Do you seriously think they give a damn about the take over being blocked or the US securities laws and the Canada Business Corporations Act? (rhetorical question…no) If the take over had gone through they would have made $13,000, instead of $15,000 a few weeks ago.
Although I do agree the directors may be consulting with the share holds less than they should, they are not thinking only of their jobs. The directors would make millions from the take over and have enough experience to find a new position easily. Personally as a Canada I think that Potash should stay a Canadian corporation, as do many others.
These three shareholders don"t have to wait for a buyout to sell their shares. They could have done like i did and sold my shares a week ago for more than what BHP is offering.
Congradulations Ellen in writing what is quite possibly the stupidest article I've ever read. Perhaps what you don't get is that PCS was not for sale when BHP made what is most definately an insulting offer. I own way more shares than would likely be considered prudent for an invertor my size and I can tell you this for sure. If BHP wants to fold up their ridiculous offer and go away...fantastic! As for your pissing & moaning over Canpotex...how about OPEC. Before you think you are qualified to speak on behalf of Potash shareholders I suggest you do a little homework.
Frevelous lawsuit by opportunists. Why would shareholders accept $130 when the stock is trading at $150+-?
So what will the lawsuit accomplish -NOTHING IMHO.
Too bad we don't have a 'loser pays' rule in the US because these people deserve to lose. I have owned my PCS shares since 2007 and believe management and the BOD are acting in the best interests of the shareholders. The reason the stock has consistently remained higher than the hostile tender offer is that the company is worth more than what is being offered. Suits like this one are just shakedown opportunities for the lawyers who bring them.
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