Potash CEO predicts big stock gains

Share

The head of Potash Corp. says the company's value "far exceeds" $170 (U.S.) a share and insists the bidding for the resources giant will have to move well above BHP hostile offer in order to win his approval.

Potash Corp. chief executive officer Bill Doyle, calling BHP's $130-a-share offer a "non-starter," repeated earlier assurances that another bid will materialize for the Saskatoon-based company as it holds discussions with a host of prospective buyers.

"When you think about this company being sold for $130, $150, $160 or $170 - when you look at the future growth of this company and where we are going with the share price ... This deal has a long way to go," Mr. Doyle said during an exclusive interview with The Globe and Mail's editorial board on Thursday.

"I am saying $170, that's crazy ... the value of this company far exceeds $170 per share," Mr. Doyle added.

The decision about how much Potash Corp. will eventually sell for, however, will be made by the company's shareholders, Mr. Doyle said.

The best move for shareholders would be to just say no, he suggested. That way the company could remain independent and give shareholders the chance to reap strong long-term returns as demand for potash steadily grows as farmers seek to boost crop yields, Mr. Doyle said.

He bluntly predicted on Thursday that Potash Corp.'s stock would "blow the doors off" its record high of about $240 if the company were to stay independent. "We are positioned for growth like no other company in the world," Mr. Doyle said.

Remaining independent in the face of a takeover bid, however, is a rare outcome in Canadian takeover battles. And Mr. Doyle, who "has a reputation of being a real promoter," according to one New York hedge fund manager, has a view that is much more optimistic than sell-side analysts who follow his company.

The average target price for Potash Corp. shares is $154.22, based on a survey of 20 analysts by Bloomberg. Prior to the bid, the average target was in the $125 range.

Potash Corp. shares closed at $140.90 on Thursday on the New York Stock Exchange, down from the 52-week high of $153.29 it hit on Aug. 23, days after BHP made its bid official.

Potash Corp.'s stock reached an all-time peak of $239.50 in New York on June 17, 2008, before a wrenching dive as the commodity boom ended with a thud. The stock dropped as low as $49.60 just six months later during the financial crisis. Before the BHP bid, the shares had regained enough ground to top $100 apiece.

Mr. Doyle argued that the market for fertilizer producers has improved enough since the bid in August that BHP's offer is now below where Potash stock would have been trading without it. He pointed to rival fertilizer maker Mosaic Co., which has risen almost 20 per cent since the BHP bid on optimism about demand. (There's little or no takeover premium built into Mosaic, since it is controlled by Cargill Inc.)

Mr. Doyle said the company is still in discussions with other potential bidders, and insists another offer is coming.

"At the end of the day, you are going to have a choice between a transaction, or the company being a standalone entity," Mr. Doyle said, but added that the proof won't come any time soon.

"This has a long way to go .. As much as certain people want to short-change the process, it won't be short."

According to one hedge fund manager who spoke on condition of anonymity, BHP CEO Marius Kloppers may be willing to offer a big premium for Potash Corp. so as not to lose another deal that could put his job on the line after a blockbuster $66-billion merger with Rio Tinto PLC fell through in 2008.

He fought for a year to get the brash deal through, spending $450-million in the process, until failing under the weight of the credit crunch and opposition from China, a huge customer that didn't like the deal.

"Kloppers has to win this one," said the hedge fund manager.

______

CEO BILL DOYLE ON THE BIDDING

Question: $170 per share is not enough?

I am saying $170, that's crazy.

Do you think there will be another bid by Nov. 18?

I do.

One or more?

I am not going to get into the details. Yes I do.

So, shareholders won't have only BHP's offer to chose from?

I believe that.

With what degree of confidence?

I am not going to handicap it. What I am telling you is we are having ongoing discussions.

Brenda Bouw