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Potash Corp. CEO Bill Doyle

Della Rollins/della rollins The Globe and Mail

Potash Corp. has successfully fended off the $38.6-billion (U.S.) takeover offer it dismissed as inadequate, but now the company is facing increasing pressure to prove it's better off without BHP Billiton Ltd.

Ottawa's decision to turn down BHP's offer, along with the extensive employment and spending commitments that came with it, creates a high hurdle for another buyer to step forward. It also raises questions about Potash Corp. chief executive officer Bill Doyle's insistence that Potash would find a competing bidder to top BHP's offer. Mr. Doyle assured on several occasions another bid would be made, and Potash Corp. last month disclosed discussions with 15 prospective bidders. Still, no alternative to BHP's offer has emerged.

That means it's now up to Mr. Doyle to find a way to provide shareholders the value he insists the company is worth. When Potash Corp. revealed BHP's $130-a-share offer in August, Potash said it "grossly" undervalued the company. In October, Mr. Doyle insisted Potash's value "far exceeds $170 per share."

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With Potash Corp. shares dropping $2.64 to $137.27 in New York on Monday - their lowest level since BHP's bid was made public - Mr. Doyle has some work to do.

What's more, Potash Corp. must also follow through with its "pledge to Saskatchewan" made in the heat of its three-month battle against BHP.

That promise includes relocating some of its executive jobs in Chicago to its headquarters in Saskatoon.

The province of Saskatchewan is signalling it will try to squeeze even more out of Potash Corp. once the dust has settled, including the possibility of Mr. Doyle moving back to the province himself.

"We think that head office officials should live in the city with the head office," Premier Brad Wall told reporters on Monday, the day after BHP announced it was withdrawing its bid for Potash Corp.

Mr. Wall said the province has "some expectations" for the pledge, which also includes investing billions to expand its mines in the province, spending more on community programs and remaining a member of the Canpotex, which became an issue for BHP when it said it wanted to pull out of the potash marketing arm.

Potash Corp. declined to comment Monday on its plans now that BHP's bid has been pulled. Mr. Doyle wasn't available for comment.

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"I think the expectations are a lot higher now [for Potash Corp.]… from the Saskatchewan government, from investors, from everybody on what they can do from an output point of view, pricing point of view," and their future plans, said Richard Kelertas, an analyst at Dundee Securities.

In the near term, Mr. Kelertas said the smartest thing Potash can do is keep its promises and keep quiet.

"Don't talk any more, now just deliver. Show us a fourth quarter that knocks our socks off. That's the main thing," he said.

Last month, Potash Corp. reported its second-highest third-quarter profit in history as a result of rising prices and demand for potash, in particular when compared to the pullback a year earlier as a result of the global recession.

The company also raised its earnings expectations and global demand forecasts amid tightening markets for such fertilizer-dependent crops as wheat and corn and rising investor demand in commodities.

Charles Neivert, a fertilizer analyst at Dahlman Rose & Co., said investors aren't hung up on whether Potash Corp. will come through with another bid, despite Mr. Doyle's repeated comments during the takeover battle that "BHP will not be the only bidder."

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"He doesn't have to shop it any more, and the reality is, where would the other bid come from?" Mr. Neivert said, citing both the $39-billion price tag and the undertakings BHP put forward to the government.

Now it's up to Potash Corp. to increase the share price on its own.

"When the earnings come, the shares will go with it. You can't raise it without actually performing, so now it's just bringing all that performance back [that the CEO]says is there," Mr. Neivert said.

On Sunday, Potash Corp. reiterated its position that BHP's bid "substantially undervalued" the company and failed to reflect its future growth prospects.

"We believe our opportunity for growth in the industry is unmatched and we are excited about the future," Potash Corp. said in its statement. "Building further value continues to be our primary focus, and ... we believe we are well-positioned to exceed the expectations of our customers and deliver compelling value to our shareholders."

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About the Author

Brenda Bouw is a freelance writer and editor based in Vancouver. She has more than 20 years of experience as a business reporter, including at The Globe and Mail, The Canadian Press, the Financial Post and was executive producer at BNN (formerly ROBTv). Brenda was also part of the Globe and Mail reporting team that won the 2010 National Newspaper Award for business journalism. More

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