Assuming the deal is approved to go forward by November 3, BHP (NYSE:BHP) has been approved for a hearing on November 8 to challenge the attempt by Potash Corp. (NYSE:POT) make it expensive and difficult to gain a majority for the takeover.
The Canadian government will decide on November 3 whether or not to allow the deal to go forward, based on the parameters of the Investment Canada Act, which are based on whether it's beneficial for Canada for the deal to go ahead.
As far as the "poison pill" attempt by Potash, that would include allowing shareholders with 20 percent or over of outstanding common shares to be diluted. That makes it almost impossible to buy because of the prohibitive costs resulting from the dilution.
It works by giving other shareholders the option to acquire additional stock as huge discounts if they choose to.
Most of this is a delay tactic in an attempt to gain another suitor, but BHP said Potash has had ample time to find an alternative to their approximate $40 billion offer if there were legitimate offers out there.
Showing posts with label Canadian Investment Act. Show all posts
Showing posts with label Canadian Investment Act. Show all posts
Tuesday, October 26, 2010
Monday, September 27, 2010
BHP (NYSE:BHP) Passes U.S. Antitrust Hurdle for Potash (NYSE:POT) Bid
BHP Billiton (NYSE:BHP) successfully passed the first regulatory hurdle on its way to attempting to acquire Potash Corp. (NYSE:POT). The U.S. Federal Trade Commission cleared them to go forward with their $39 billion bid for the fertilizer giant.
Although there are many hoops to jump through, there really is only one that has an actual chances of interfering with the deal from a regulatory standpoint.
That would be in relationship to the Canadian Investment Act, which determines whether it's in the best interest of the country for a company located there to be taken over.
Most of that is centered around the single issue of royalties received by Saskatchewan from Potash.
With BHP wanting to opt out of Canpotex, which is a cartel controlling the supply, and thus potash prices in the region, the Canadian province is fighting against the deal going forward because of the perceived loss of income.
BHP wants to compete at market levels, which is of course the only way to go. That would put downward pressure on prices to the benefit of farmers, and ultimately consumers.
Saskatchewan leaders don't understand how selling more product at lower prices makes up for the higher margins sold with lower sales.
Either way, it seems only the shareholders of Potash will make or break the deal, and they of course will want more money for the company to give their approval. But if they stretch too far it will fall apart, as BHP CEO Marius Kloppers has stated he won't increase the bid in a way that would hurt the shareholders of his company.
While there may be a little wiggle room to increase the bid, it seems Kloppers is adamant on his outlook and won't jeopardize the financial health of BHP to acquire Potash at any cost.
Although there are many hoops to jump through, there really is only one that has an actual chances of interfering with the deal from a regulatory standpoint.
That would be in relationship to the Canadian Investment Act, which determines whether it's in the best interest of the country for a company located there to be taken over.
Most of that is centered around the single issue of royalties received by Saskatchewan from Potash.
With BHP wanting to opt out of Canpotex, which is a cartel controlling the supply, and thus potash prices in the region, the Canadian province is fighting against the deal going forward because of the perceived loss of income.
BHP wants to compete at market levels, which is of course the only way to go. That would put downward pressure on prices to the benefit of farmers, and ultimately consumers.
Saskatchewan leaders don't understand how selling more product at lower prices makes up for the higher margins sold with lower sales.
Either way, it seems only the shareholders of Potash will make or break the deal, and they of course will want more money for the company to give their approval. But if they stretch too far it will fall apart, as BHP CEO Marius Kloppers has stated he won't increase the bid in a way that would hurt the shareholders of his company.
While there may be a little wiggle room to increase the bid, it seems Kloppers is adamant on his outlook and won't jeopardize the financial health of BHP to acquire Potash at any cost.
Subscribe to:
Posts (Atom)