Mining giant BHP Billiton to take bid to Potash shareholders

Mining giant BHP Billiton went on the attack Wednesday, saying it would take its nearly $39-billion takeover bid for Potash Corp. straight to shareholders after the fertilizer firm’s board spurned the offer as grossly inadequate.

The Anglo-Australian mining firm expressed confidence in its $130-a-share all-cash offer for Canada-based Potash Corp. of Saskatchewan Inc.

The offer values the company at $38.6 billion and represents a 20% premium to the closing price of Potash shares Aug. 11, the day before BHP Billiton’s first approach to the firm.

“We firmly believe that Potash Corp. shareholders will find the certainty of a cash offer, at a premium of 32% to the 30-trading-day-period average, very attractive and we have therefore decided to make this offer directly to those shareholders,” said BHP Billiton Chairman Jacques Nasser.

But that’s not likely to sway Potash directors, according to a Credit Suisse report. Fair value for the company is probably between $148 and $180 a share, depending on how the company recovers its potash production after last year’s slump.

Potash, a pale yellow compound mined predominantly in Canada, Russia and Ethiopia, is an important ingredient for fertilizers, which have seen increased demand as a result of higher grain prices.

“A bid based at a 50% premium (about $163 a share) may be acceptable to the Potash board — but would probably require an accompanying BHP buyback to make the metrics more attractive to BHP shareholders,” the investment firm said.

Lesova and Hinton write for MarketWatch.com/McClatchy.