November 1, 2010 / 9:51 AM / in 8 years

UPDATE 2-BHP in no rush to up Potash bid before ruling-source

 * Three key hurdles loom for BHP's Potash bid in next 8 days
 * BHP not going to hike bid before clearing hurdles - source
 * BHP investors question need for higher bid if no rival bid
 * Potash shares still trade above BHP's offer
  (Updates shares)
 By Sonali Paul and Michael Smith
 MELBOURNE/SYDNEY, Nov 1 (Reuters) - BHP Billiton  feels no
pressure to raise its $39 billion offer for Potash Corp since no
rival has emerged, and is focused on clearing three hurdles, a
person familiar with the situation said.
 The Sunday Times newspaper in London reported BHP planned to
sweeten its offer for the world's biggest fertiliser maker by 10
percent, citing sources close to the situation.
 A person familiar with the situation said BHP was working on
surmounting three legal and regulatory obstacles over the next
eight days, including winning approval from Canada, before it
did anything else.
 Major BHP investors said the company should be wary about
bumping up the bid price and several objected to an increase of
more than 10 percent.
 Canada was due to decide by Nov. 3 whether BHP's bid for
Potash Corp will bring a net benefit to Canada, which would
allow it to clear the bid or approve it with conditions.
 When asked if BHP could raise its offer ahead of the Nov. 3
ruling by Canada, the person said: "No."
 "There is only one offer on the table," the person added.
 BHP Billiton, the world's biggest mining group, declined to
comment on whether it plans to raise its bid by 10 percent, but
its investors were cautious about any sweetener.
 "They (BHP) could well put forward one final bid to get it
over the line," said James Holt, investment specialist at
BlackRock Investments, BHP's biggest single shareholder.
 "But the much bigger issue is that there hasn't been any
white knight that has come along. It's become quite clear there
are very few people out there with the capacity to buy (Potash)
 BHP has not ruled out raising its offer, but to date has
kept reminding the market that its offer is the only one on the
 Another top 10 shareholder based in London said: "If BHP
raise their current offer by 10 percent, we could live with
that. But anything beyond that level would destroy value.
 "It's just a case of how much you are willing to give the
other side. It's difficult for any deal to stack up beyond that
(10 percent) level," said the investor, who declined to be
 If BHP sweetens the offer to a price that exceeds 25 percent
of its own market capitalisation, now around $216 billion, it
may also have to seek the approval of its own shareholders. 
 In a Reuters poll in September, BHP investors said the group
should not raise its bid to more than $155 a share, a rise of 19
 But at the moment BHP is tackling more more pressing issues,
including convincing Canadian authorities to give a green light
to the deal.
 Canada's ruling Conservatives are under pressure from
Saskatchewan, home to Potash, and four other provinces to block
the bid, but Industry Minister Tony Clement has said Canada
needs to be open to foreign investment.
 After Canada's decision, a U.S. court is due to hear on Nov.
4 Potash's call for an injunction to stall BHP's bid on the
grounds it did not give enough information about its intentions.
 The final regulatory hurdle is a hearing on Nov. 8-9, when
Saskatchewan's securities watchdog is set to hear BHP's
challenge to Potash's poison pill. BHP wants the shareholder
rights plan suspended, while Potash wants it extended to give
time for a white knight to emerge.
 Potash dismissed BHP's hostile offer of $130 a share in
August as totally inadequate but has failed to line up an
alternative offer for shareholders so far, saying that other
potential bidders need more time to line up financing.
 Given that BHP has said it has been eyeing Potash for a long
time and potash as a commodity has all the characteristics that
BHP wants -- large, low cost, long-life, expandable and
exportable -- investors are betting BHP will raise its offer to
seal a deal.
 Potash Corp shares last traded at $145.90, 12 percent above
the offer price.
 Some shareholders would be relieved if Canada blocked the
bid or BHP decided not to raise the offer.
 "I would be very concerned if they raised the bid. I think
the price is full," said a fund manager in Sydney, who declined
to be named. "I'm yet to be convinced it's a compelling
 BHP shares in London rose 0.79 percent to 2231 pence by 1314
GMT, outperforming a 0.55 percent firmer British mining index,
which gained on the back of a rally in metals prices.
 Liberum Capital in London said BHP investors would benefit
whichever way the regulatory decision went. A denial would allow
the group to return capital to shareholders.
 "With the deadline for Canadian government approval on
Wednesday, we see asymmetric upside to BHP in the event that
either the deal is blocked, and thus a buyback is likely
initiated, or they are able to succeed with only a small bump to
their original bid."
  (Addtional reporting by Raji Menon and Eric Onstad in London;
Editing by Anshuman Daga and Michael Shields)

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