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.
Showing posts with label Potash Company News. Show all posts
Showing posts with label Potash Company News. Show all posts
Monday, September 27, 2010
Tuesday, September 21, 2010
Canada Questioning BHP's (NYSE:BHP) Potash (NYSE:POT) Bid
The Canadian government is attempting to sway public opinion against the bid by BHP Billiton Ltd. (NYSE:BHP) for Potash Corporation of Saskatchewan (NYSE:POT), generating the question on whether or not the bid is good for the Canadian province.
The premier of Saskatchewan, Brad Wall, said, "The question needs to be, 'Are Saskatchewan people, are Canadians better off as a result of this, is our economy stronger as a result of this very large deal?'". We're doing our homework, we'll see what all of that due diligence tells us, but as of today I'm having a hard time answering that question in the affirmative."
This is all smoke and mirrors, as the real issue is the Canadian province extracts royalty fees from Potash, and the announcement by BHP they weren't interested in continuing on with the marketing arm Canpotex, is what's really behind the "better for Canada" issue.
Canpotex is the consortium of Potash, Mosaic (NYSE:MOS) and Agrium (NYSE:AGU), which in reality are a monopoly controlling potash prices in this part of the world.
They are afraid, and rightly so, that BHP will abandon the monopoly once the existing agreements run out, which would lower the price of the fertilizer and Saskatchewan wouldn't receive as much in fees as they had been.
This shouldn't be any of the business of the Canadian government, as they shouldn't have any say in non-legal matters of a company and how it is run or whether it is acquired or not.
Since when does a business equate to a quasi-government entity, where clueless politicians consider an asset of the country and not the shareholders or individuals which own it?
The premier of Saskatchewan, Brad Wall, said, "The question needs to be, 'Are Saskatchewan people, are Canadians better off as a result of this, is our economy stronger as a result of this very large deal?'". We're doing our homework, we'll see what all of that due diligence tells us, but as of today I'm having a hard time answering that question in the affirmative."
This is all smoke and mirrors, as the real issue is the Canadian province extracts royalty fees from Potash, and the announcement by BHP they weren't interested in continuing on with the marketing arm Canpotex, is what's really behind the "better for Canada" issue.
Canpotex is the consortium of Potash, Mosaic (NYSE:MOS) and Agrium (NYSE:AGU), which in reality are a monopoly controlling potash prices in this part of the world.
They are afraid, and rightly so, that BHP will abandon the monopoly once the existing agreements run out, which would lower the price of the fertilizer and Saskatchewan wouldn't receive as much in fees as they had been.
This shouldn't be any of the business of the Canadian government, as they shouldn't have any say in non-legal matters of a company and how it is run or whether it is acquired or not.
Since when does a business equate to a quasi-government entity, where clueless politicians consider an asset of the country and not the shareholders or individuals which own it?
Tuesday, September 7, 2010
Vale (NYSE:VALE) Joins BHP (NYSE:BHP) in Diversifying into Fertilizers
Although Vale (NYSE:VALE) and BHP Billiton (NYSE:BHP) aren't new to fertilizers, it is the growing focus for growth they're looking to the sector for, expanding far beyond their metals' base.
Vale has laid down the gauntlet, saying over the long term they're going to become the largest producer of fertilizer in the world.
At this time their goal for the next seven years for potash is to increase production to 10.7 million tons a year, and triple their annual phosphate production to 19.2 million. Now the company produces from 6 to 7 million metric tons of phosphate on a yearly basis.
If they achieve those combined goals, at that time they would be the largest producer of fertilizers in the world.
In potash they would still be behind Mosaic (NYSE:MOS) and BHP Billiton, assuming BHP lands the potash deal. Of course if they do, BHP has already said they're going to ramp up production, which makes the assertion of being the largest supplier of fertilizer in the world by 2017, making it a much larger challenge for Vale.
The bottom line is metal companies are diversifying even more, and the large ones are positioning themselves in a way which could make them much less cyclical when combining all their products.
Vale has laid down the gauntlet, saying over the long term they're going to become the largest producer of fertilizer in the world.
At this time their goal for the next seven years for potash is to increase production to 10.7 million tons a year, and triple their annual phosphate production to 19.2 million. Now the company produces from 6 to 7 million metric tons of phosphate on a yearly basis.
If they achieve those combined goals, at that time they would be the largest producer of fertilizers in the world.
In potash they would still be behind Mosaic (NYSE:MOS) and BHP Billiton, assuming BHP lands the potash deal. Of course if they do, BHP has already said they're going to ramp up production, which makes the assertion of being the largest supplier of fertilizer in the world by 2017, making it a much larger challenge for Vale.
The bottom line is metal companies are diversifying even more, and the large ones are positioning themselves in a way which could make them much less cyclical when combining all their products.
Tuesday, August 31, 2010
BHP (NYSE:BHP) Pressuring Potash (NYSE:POT) by Contacting Customers
BHP Billiton (NYSE:BHP) is increasing the pressure on Potash Corp. (NYSE:POT) by contacting a large number of their customers, which seems to be getting under the skin of some at the giant fertilizer company.
In a letter dated August 30, Potash head of sales Stephen Dowdle, who sent the letter to customers, said, "Since the purpose of BHP Billiton's call clearly was not to solicit your potash order from BHP Billiton's Jansen project ... we consider this contact to be inappropriate." He also said in the letter that the contact by BHP was "highly unethical."
The reference to the Jansen Project is a potash resource recently acquired by BHP in Saskatchewan, which production has been started yet, or even cleared by directors. In other words, Dowdle was saying there could be no reason for BHP to be contacting them for business purposes.
Dowdle concluded, "We can only assume that BHP Billiton's purpose is to sow seeds of doubt and confusion about the future of Potash Corp by raising questions about our ability to do business across the nutrient spectrum as well as the future location and makeup of our sales organization."
The letter was included in a regulatory filing by Potash, although it spoke in general and not specific terms about what BHP was saying to their customers.
This is no doubt a move by BHP to put into the minds of their customers that they would be better off with them owning Potash than Potash continuing on as they are.
In a letter dated August 30, Potash head of sales Stephen Dowdle, who sent the letter to customers, said, "Since the purpose of BHP Billiton's call clearly was not to solicit your potash order from BHP Billiton's Jansen project ... we consider this contact to be inappropriate." He also said in the letter that the contact by BHP was "highly unethical."
The reference to the Jansen Project is a potash resource recently acquired by BHP in Saskatchewan, which production has been started yet, or even cleared by directors. In other words, Dowdle was saying there could be no reason for BHP to be contacting them for business purposes.
Dowdle concluded, "We can only assume that BHP Billiton's purpose is to sow seeds of doubt and confusion about the future of Potash Corp by raising questions about our ability to do business across the nutrient spectrum as well as the future location and makeup of our sales organization."
The letter was included in a regulatory filing by Potash, although it spoke in general and not specific terms about what BHP was saying to their customers.
This is no doubt a move by BHP to put into the minds of their customers that they would be better off with them owning Potash than Potash continuing on as they are.
Potash (NYSE:POT) Downgraded by Gleacher (Nasdaq:GLCH)
Potash Corp. (NYSE:POT) was downgraded by Gleacher & Co. (Nasdaq:GLCH) from "Buy" to "Neutral," saying there's not much more room to move upward, as most of the bid by BHP Billiton is already built into the share price.
"We are downgrading POT to Neutral as we believe significant upside from current levels is limited. The share price is at $146.73, 13% higher than the BHP bid of $130 as investors anticipate a higher bid from BHP (NYSE:BHP) (likely) or the emergence of a white knight (less likely)...We are adjusting our fair value to $160 per share, which represents a 10% premium to our estimated replacement value of $146," said Gleacher.
Potash is down slightly today, standing at $146.70, losing $0.14, or 0.10 percent, as of 1:16 PM EDT.
"We are downgrading POT to Neutral as we believe significant upside from current levels is limited. The share price is at $146.73, 13% higher than the BHP bid of $130 as investors anticipate a higher bid from BHP (NYSE:BHP) (likely) or the emergence of a white knight (less likely)...We are adjusting our fair value to $160 per share, which represents a 10% premium to our estimated replacement value of $146," said Gleacher.
Potash is down slightly today, standing at $146.70, losing $0.14, or 0.10 percent, as of 1:16 PM EDT.
Monday, August 30, 2010
Agrium (NYSE:AGU) Interested in Potash (NSYE:POT) Assets
If BHP Billiton Ltd. (NYSE:BHP) acquires Potash Corp. of Saskatchewan Inc. (NSYE:POT), Agrium (NYSE:AGU) has let it be known that they would be interested in buying up some of the assets of the fertilizer company once the takeover was completed.
Agrium Chief Executive Officer Mike Wilson said in an interview, “If those assets come out at a value that makes sense for Agrium, of course we would look at them. The company is interested in agricultural assets and businesses in any part of the world.
Units that could possibly be put up for sale would be those producing nitrogen and phosphates. Wilson said he would even be interested in some of their potash if it was put up for sale.
Wilson sees the overall outlook for nitrogen, phosphate and potash fertilizers as very good. Phosphate could come under pressure in 2011 because of increased supply. Wilson sees demand over the next year and a half absorbing that and new supply will be needed at that time.
Agrium is in midst of attempting to acquire Australian largest wheat exporter AWB Ltd., as they're waiting for approvals to go forward.
Agrium Chief Executive Officer Mike Wilson said in an interview, “If those assets come out at a value that makes sense for Agrium, of course we would look at them. The company is interested in agricultural assets and businesses in any part of the world.
Units that could possibly be put up for sale would be those producing nitrogen and phosphates. Wilson said he would even be interested in some of their potash if it was put up for sale.
Wilson sees the overall outlook for nitrogen, phosphate and potash fertilizers as very good. Phosphate could come under pressure in 2011 because of increased supply. Wilson sees demand over the next year and a half absorbing that and new supply will be needed at that time.
Agrium is in midst of attempting to acquire Australian largest wheat exporter AWB Ltd., as they're waiting for approvals to go forward.
Wednesday, August 25, 2010
BHP's CEO Won't Comment on BP (NYSE:BP) Interest
Now that BHP (NYSE:BHP) is a primary focus of the economic media, every possibility seems to be a target of inquisition, including the possibility of acquiring some assets of BP (NYSE:BP) they're shopping to raise capital to pay for mounting liabilities.
When BHP CEO Marius Kloppers was asked if they were involved with any negotiations with BP for some assets, he refused to comment, saying his primary focus now is on securing the deal for Potash (NYSE:POT).
Kloppers did say on a conference call that "beyond the acquisition of potash, our aspirations to grow the deployment of capital in the natural resources space would be undiminished," seeming to imply a lot of things are on the table.
BHP could acquire BP assets without hurting the company or increasing costs from being downgraded, as they generate a cashflow of $38.6 billion annually, with only $3.3 billion in net debt.
The company has said their goal is to maintain their A credit rating and ongoing dividend policy while they expand the business.
When BHP CEO Marius Kloppers was asked if they were involved with any negotiations with BP for some assets, he refused to comment, saying his primary focus now is on securing the deal for Potash (NYSE:POT).
Kloppers did say on a conference call that "beyond the acquisition of potash, our aspirations to grow the deployment of capital in the natural resources space would be undiminished," seeming to imply a lot of things are on the table.
BHP could acquire BP assets without hurting the company or increasing costs from being downgraded, as they generate a cashflow of $38.6 billion annually, with only $3.3 billion in net debt.
The company has said their goal is to maintain their A credit rating and ongoing dividend policy while they expand the business.
Two Charged in BHP (NYSE:BHP), Potash (NYSE:POT) Insider Trading
Two traders have been charged by the Securities and Exchange Commission for insider trading in relationship to the BHP (NYSE:BHP) bid for Potash (NYSE:POT).
One of the men, Juan Jose Fernandez Garcia, from Spain, works for Banco Santander SA as head of research. Banco Santander is the advisor for BHP in their Potash bid.
It wasn't clear, outside of alleged insider trading, what other connection Luis Martin Caro Sanchez, the other man charged, also from Spain, played in the deal, if any.
The charges are making trades on secret information, where illegal profits of $1.1 million were made in bets Potash stock would increase.
Early in August the two traders spent $61,000 on contracts which were at a set price, and which were close to expiring. The only way the two could have made money would have been for the shares of Potash to increase in value rapidly.
The pair attempted to move their money out of the country to Spain, but failed in the attempt.
Trades were made on the Chicago Board Options Exchange, and the charges were filed by the SEC in federal district court in Illinois.
One of the men, Juan Jose Fernandez Garcia, from Spain, works for Banco Santander SA as head of research. Banco Santander is the advisor for BHP in their Potash bid.
It wasn't clear, outside of alleged insider trading, what other connection Luis Martin Caro Sanchez, the other man charged, also from Spain, played in the deal, if any.
The charges are making trades on secret information, where illegal profits of $1.1 million were made in bets Potash stock would increase.
Early in August the two traders spent $61,000 on contracts which were at a set price, and which were close to expiring. The only way the two could have made money would have been for the shares of Potash to increase in value rapidly.
The pair attempted to move their money out of the country to Spain, but failed in the attempt.
Trades were made on the Chicago Board Options Exchange, and the charges were filed by the SEC in federal district court in Illinois.
Monday, August 23, 2010
Potash (NYSE:POT) CEO Vows Company Won't Sell Cheap
After the board of Potash (NYSE:POT) officially rejected the bid from BHP Billiton (NYSE:BHP), CEO Bill Doyle said in an interview the company is worth billions more than the offer from BHP.
Boyle noted, “Two years ago we hit $240 and in the meantime we have been adding capacity through our capital program of expansions.”
The highs for Potash would be valued at close to $71 billion if that's what the would bring.
Although current market conditions couldn't justify those numbers, taking into account the surety of increased demand for potash and other fertilizers in the years ahead does give Potash some support and justification for pushing up the price, and they very well could get billions more, especially if it ends up being a bidding war.
This could happen because of the sector they're in, as several emerging markets, especially China, don't have the fertilizers needed domestically to handle their growing demand, and so are looking for partnerships or deals to address that large need.
Rumors have several companies from China being interested in Potash, but price is a factor, along with leverage, which could punish a company for a long period of time if both are exorbitant.
Boyle noted, “Two years ago we hit $240 and in the meantime we have been adding capacity through our capital program of expansions.”
The highs for Potash would be valued at close to $71 billion if that's what the would bring.
Although current market conditions couldn't justify those numbers, taking into account the surety of increased demand for potash and other fertilizers in the years ahead does give Potash some support and justification for pushing up the price, and they very well could get billions more, especially if it ends up being a bidding war.
This could happen because of the sector they're in, as several emerging markets, especially China, don't have the fertilizers needed domestically to handle their growing demand, and so are looking for partnerships or deals to address that large need.
Rumors have several companies from China being interested in Potash, but price is a factor, along with leverage, which could punish a company for a long period of time if both are exorbitant.
Citigroup (NYSE:C) Prefers BHP (NYSE:BHP) Buyback Over Potash (NYSE:POT)
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.
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.
Wednesday, August 18, 2010
BHP (NYSE:BHP) Going Rogue with Potash (NYSE:POT) Offer
After being turned down by the board of Potash (NYSE:POT) for their $40 billion offer for the company, BHP Billiton (NYSE:BHP) has gone hostile and will appeal directly to shareholders of the fertilizer company.
The board of directors of Potash believed the offer was far below the value of the company, and rejected it unanimously.
BHP will begin its direct appeal to shareholders on August 20, when they use a newspaper advertisement to start the process. A deadline for accepting the offer will remain open until 11:59 PM EDT on October 19, 2010.
Evidently BHP believes their offer of $130 a share will encourage shareholders to accept the offer, even though in New York it's trading at $147.22, gaining $4.05, or 2.83 percent.
But that's part of the strategy to generate the idea in the minds of shareholders that the company is desirable, and then coming in later with a higher offer which could be much more palatable and open to reception.
The board of directors of Potash believed the offer was far below the value of the company, and rejected it unanimously.
BHP will begin its direct appeal to shareholders on August 20, when they use a newspaper advertisement to start the process. A deadline for accepting the offer will remain open until 11:59 PM EDT on October 19, 2010.
Evidently BHP believes their offer of $130 a share will encourage shareholders to accept the offer, even though in New York it's trading at $147.22, gaining $4.05, or 2.83 percent.
But that's part of the strategy to generate the idea in the minds of shareholders that the company is desirable, and then coming in later with a higher offer which could be much more palatable and open to reception.
Friday, June 25, 2010
Goldman (NYSE:GS) Continues "Neutral" Rating on Potash (NYSE:POT)
This week Goldman Sachs (NYSE:GS) reiterated their "Neutral" rating on Potash (NYSE:POT), while also setting a price target of $131 a share.
Potash, which is the largest producer of potash fertilizer, has lagged the overall market, as they are down close to ten percent on the year, while the broader market has dropped five percent.
The weak economy continues to hinder the stock, as ongoing uncertainty and conflicting data, which could be interpreted more than one way, generated a sense of chaos and inability to project accurately as to where the economy is really going, and how much demand for products like the potash fertilizer the company produces will grow.
If the company does reach the projected $131 target, it's not going to be in 2010, as in the short term there's not a lot to be positive about in the current economic climate.
Potash was at $95.37 as of 3:39 PM EDT on Friday, a gain of $0.17 or 0.18 percent.
Potash, which is the largest producer of potash fertilizer, has lagged the overall market, as they are down close to ten percent on the year, while the broader market has dropped five percent.
The weak economy continues to hinder the stock, as ongoing uncertainty and conflicting data, which could be interpreted more than one way, generated a sense of chaos and inability to project accurately as to where the economy is really going, and how much demand for products like the potash fertilizer the company produces will grow.
If the company does reach the projected $131 target, it's not going to be in 2010, as in the short term there's not a lot to be positive about in the current economic climate.
Potash was at $95.37 as of 3:39 PM EDT on Friday, a gain of $0.17 or 0.18 percent.
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