Doyle does YouTube; says BHP offer non-starter, will not allow them to steal company value

“No company in the industry is better positioned for earnings growth,” said Doyle. “PotashCorp’s shareholders, not BHP’s, deserve to capture the upside value.

“In 2010, all major potash markets, with the exception of China, have returned to near pre-downturn consumption levels. And we’ve seen as recently as 2006, that when China returns to the market, they can do so with a bang.” Doyle noted that China is facing significant challenges as a result of adverse weather and nutrient imbalances that were exacerbated in recent growing seasons. “This year, China is expected to import 75 percent of its soybean requirements at the rate of around 1 million mt per week, along with significant volumes of corn for the first time since 1996.” He added that India is dealing with significant food inflation and is expected to consume record volumes of potash in 2010 in an effort to stimulate lagging crop yields.

“We expect all key markets to return to the long-term trend line demand in 2011, with estimated potash demand of 55 million mt,” said Doyle, with global distributor restocking possibly adding another 5 million mt.

Doyle reiterated that current pricing can’t support a new greenfield potash mine, making existing capacity and brownfield expansions even more valuable. “We don’t intend to let anyone steal that value from our shareholders.”

He said it was in BHP’s interest to make the current process as short as possible. “But we anticipate that the process will be more like a marathon than a sprint.” He noted that other major Canadian transactions of marquee properties have taken considerable time to complete.

“We feel strongly that we can create more value by pursuing alternative options or by continuing to execute on our strategic plan,” said Doyle. “Just take a look at our track record. Over the last 15 years, our compounded annual total shareholder return – even with the Great Recession – was 19 percent. That was 10 percent greater than the average return of our competitors in the fertilizer space, and far surpassed the S&P 500’s return of 6 percent. Our track record for performance is pretty hard to beat.”

Doyle also said the majority of PotashCorp shareholders are long-term, stable, and supportive. “Our large investors have clearly communicated to us that the US$130 per share offer is a non-starter. In fact, some of our long-term holders have been adding to their positions during this period. PotashCorp is a very large company, and we expect arbitrageurs will not represent as large a portion of the shareholder bases as in other, smaller transactions.” He expects long-term shareholders, many of whom have been with the company since it went public over two decades ago, will ultimately decide the value of the company and what transaction will occur.

In the meantime, BHP shareholders are not necessarily that keen on a PotashCorp acquisition, according to a Bloomberg survey that found that 64 percent of respondents would instead prefer that BHP invest in its own mines, buy back stock, or increase dividends.

China, a country intently concerned about food security, is reportedly scouring the world trying to find someone else to buy PotashCorp besides BHP, with reports that it has contacted companies around Asia, as well as Canadian pension funds. An outright purchase by a Chinese entity may be problematic, as Canadian editorials are buzzing with concerns about a major natural resource firm being sold to another country, be it China or Australia. “Would China allow its most important corporation to be bought by powerful foreigners? Would Australia? Would the United States? Would Japan?,” asked Diane Francis in The Financial Post.

China is also reportedly eyeing anti-monopoly action in case it does not like the PotashCorp outcome and a possible Uralkali-Silvinit merger in Russia. Speculation continued last week regarding the latter deal, and also that Rio Tinto might invest in a new Russian entity. According to the Russian media, Silvinit has sold its 32 percent interest in trading company International Potash Co., a move that could be seen as paving the way for a Uralkali/Silvinit merger. Uralkali, along with Belaruskali, uses another trader, Belarusian Potash Co.