September 27, 2010 / 6:16 PM / in 8 years

UPDATE 2-Potash Corp suit vs BHP allowed to proceed

* Court to allow the discovery process to proceed

* Court to rule on preliminary injunction on Nov. 4 (Adds details on lawsuit, BHP comment, Potash Corp comment and share price move)

By Eric Johnson and Euan Rocha

CHICAGO/TORONTO, Sept 27 (Reuters) - A U.S. federal judge said on Monday he would allow the discovery process to proceed in a lawsuit filed by Potash Corp POT.TO to fend off BHP Billiton’s (BHP.AX) $39 billion hostile takeover bid.

The lawsuit, filed last week in a U.S. District Court in Chicago, alleges that BHP misrepresented material facts related to its bid for the world’s largest producer of potash — a key crop nutrient.

Lawyers said the court’s ruling was not unexpected and that Potash Corp would likely file an amended complaint, as the discovery process continues to move forward.

“I would expect that discovery is likely to lead to an amended complaint and new allegations of disclosure violations,” said John Coffee, a professor at Columbia Law School in New York.

Saskatoon, Saskatchewan-based Potash Corp have flatly rejected BHP’s bid as “grossly inadequate.” The company has said that it has been approached by other parties that are interested in tabling alternative proposals and that BHP’s offer had “no traction whatsoever” with shareholders.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Full coverage of BHP’s bid for Potash [ID:nN22340110]

Scenarios for Potash [ID:nN24267706]

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As part of the discovery process, Potash Corp have asked that BHP produce a long list of documents that include BHP’s statements regarding investments in the potash industry and the minutes of BHP’s board meetings that relate to the potash sector. BHP was also asked to provide any documents on its plans to develop its Jansen potash project in Saskatchewan.

The company has also requested that some of BHP’s top executives present depositions in relation to the matter.

“I have read the motion and read the responses, unless BHP is prepared to extend the tender date, I am not going to stay discovery,” said Judge David Coar, in response to BHP’s request that expedited discovery be denied.

Judge Coar said that the court would conduct a hearing on Potash Corp’s request for a preliminary injunction to block BHP from proceeding with its tender offer on Nov. 4, ahead of the Nov. 18 deadline on BHP’s bid.

“We are pleased that the court has scheduled a hearing on November 4, well in advance of the November 18 scheduled expiration of our offer. We are gratified that the court made clear that the Potash Corp of Saskatchewan Inc discovery proposals are excessively broad,” said BHP in a statement.

BHP also noted that today’s ruling did not address the sufficiency of the complaint or the merits of the case. The world’s largest reiterated that it intends to “vigorously” contest the lawsuit.

A spokesman for Potash Corp declined to comment on today’s outcome, but stated that the judge’s ruling speaks for itself.

An attorney representing BHP in the matter told the court that the Anglo-Australian miner intends to file a motion to dismiss the lawsuit.

Shares of Potash Corp were up 85 cents at $146.85 in afternoon trade on the Toronto Stock Exchange.

The case is Potash Corp v. BHP Billiton in the U.S. District Court for the Northern District of Illinois Eastern Division, No. 1:10-cv-06024. (Reporting by Eric Johnson in Chicago; Writing by Euan Rocha)

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