A train car waits in line last week at the Potash Corp's Cory mine site near Saskatoon.DAVID STOBBE
Potash Corp. of Saskatchewan said it is in talks with "several" potential white knights to fend off a $38.6-billion (U.S.) hostile bid from Australia's BHP Billiton PLC .
The Potash Corp. board Monday officially rejected the $130-a-share bid and said in a circular sent to shareholders that the company "has been approached by, and has initiated contact with, a number of third parties who have expressed an interest in considering alternative transactions. Discussions are being pursued with several of these third parties in order to generate value-enhancing alternatives."
China's Sinochem Group and Brazil's Vale SA made initial inquiries with Potash Corp.'s board of directors late last week about the possibility of holding talks, said a person with knowledge of the matter, according to Bloomberg News.
Later Monday, Vale said "that rumors about a bid to acquire a fertilizers company or about negotiations with the purpose of making a bid to acquire such company are totally unfounded."
In the meantime, the board urged shareholders not to tender their stock to the BHP bid because it is "wholly inadequate."
"It's a long process here that we are engaged in and the key is that we deliver the value equation for our shareholders, whether that's a standalone company or whether there is a transaction," Potash CEO Bill Doyle said in an interview Monday.
"All of it is very hard to predict at this current time. We have a lot of interested parties that have popped their head up here since the announcement last week and it's a broad universe of companies. ... You should not limit your imagination to what type of companies ... It's not just fertilizer companies."
Mr. Doyle wouldn't comment on what companies he was talking to, or where they are located. He did speak about the company's long-term relationship with Sinofert, which is one of the companies said to be looking at Potash.
"That's a very exciting company," he said, but wouldn't comment on whether they are in talks.
The rejection of the $130-a-share bid is little surprise after Potash Corp. turned down the same price when presented with it in private by BHP earlier in August. After that, BHP decided to mail the offer directly to shareholders.
Potash Corp. stock is trading well above the offer price, and most analysts and investors believe that BHP will have to raise the bid significantly to win Potash shareholders over.
Other companies also contacted the board of the world's biggest fertilizer producer, and talks may not materialize, Bloomberg said. State-owned Sinochem's interest would indicate China's desire to stop BHP from controlling more supplies to the world's biggest consumer of commodities after years of price tensions over iron ore.
'Highly Opportunistic'
Potash Corp. said in regulatory documents filed Monday that the BHP bid doesn't reflect its " substantial recent and ongoing investments to increase capacity, the value of Potash Corp.'s strategic equity investments in China, Chile, Jordan and Israel," as well as its "unmatched ability" to serve its North American customers.
The Saskatoon-based company also noted how much its shares have risen since the offer was made public last week - beyond the $130 offer price.
"Potash Corp. believes that the performance of the common shares during this period is a strong indicator that the market believes that the BHP Billiton offer undervalues the common shares."
Potash said the board believes the timing of the offer is "highly opportunistic" and represents an "ill-disguised attempt to exploit an anomaly in the equity market valuation of Potash Corp. and that BHP Billiton is opportunistically attempting to transfer the upside value in Potash Corp. to its own shareholders at the expense of Potash Corp. shareholders."
Melbourne-based BHP Billiton, with a market capitalization of about $200-billion, has been expanding its presence in Saskatchewan's potash hub, buying up several smaller names in the business, including Athabasca Potash Inc. earlier this year.
- With files from Brenda Bouw and the Canadian Press