Monday, November 1, 2010

BHP (NYSE:BHP) Will Wait to Raise Bid for Potash (NYSE:POT)

Although there are many guesses as to how high BHP (NYSE:BHP) will raise its bid for Potash Corp. (NYSE:POT), one thing all agree on, is they are in no hurry to do it before they pass through regulatory hurdles, and in light of no competitor emerging to challenge them for the fertilizer giant.

UBS (NYSE:UBS) has offered one of the higher price scenarios, saying they may bid as high as $165 a share to gain the company. That would be surprising if they went that high, as BHP shareholders have reportedly said they don't want the bid to go any higher than 10 percent.

That is actually good news for BHP, as there has been pressure on them to expand through acquisition, but it's good to see shareholders not willing to grow at any expense.

Yet UBS analyst Olivia Ker wrote in a note, “BHP may be prepared to pay up to this higher limit given the strength in fertilizer prices as well as an approximate 30 percent re-rating of other names in the agricultural space since the bid was announced.”

That seems like a weak argument based on the fact a major reason for the 30 percent re-rating in the industry is from the bid of BHP for Potash. There is also of course the increased price of corn and soybeans, which most believe will leave farmers with more capital, which they could spend on more fertilizer.

Nothing can or will go forward until the decision by Canada in a couple of days whether they'll allow the deal to proceed.

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