PotashCorp sent a letter to customers Aug. 30 accusing BHP Billiton of “inappropriate and highly unethical” contact. BHP is trying to buy PotashCorp for $130 per share, a price PotashCorp says is totally inadequate.
In the letter, PotashCorp President Stephen Dowdle said that the company recently learned that Chris Ryder, BHP director of potash marketing, has begun cold calling many of PotashCorp’s customers. “Since the purpose of BHP Billiton’s call clearly was not to solicit your potash order from BHP Billiton’s Jansen project – a multi-year greenfield project which BHP is not even proposing to take to its board of directors for approval until 2011 – we consider this contact to be inappropriate and highly unethical,” said Dowdle. “We can only assume that BHP Billiton’s purpose is to sow seeds of doubt and confusion about the future of PotashCorp by raising questions about our ability to do business across the nutrient spectrum as well as the future location and makeup of our sales organization.
“While we are disappointed that BHP Billiton would attempt to undermine our efforts to serve you, you should know that we remain 100 percent committed to being your partner and your go-to source for your fertilizer needs,” said Dowdle. “Delivering on our commitment to you has always been, and continues to be, our top priority.”
BHP had not returned inquiries at press time.
In related news last week, when asked if Agrium Inc. would be interested in any PotashCorp assets should they be sold after a BHP acquisition, Agrium President and CEO Michael Wilson said the company looks at any N, P, and K assets that might be for sale. Although this comment was hyped in the general media, most any major fertilizer company with access to capital would have said the same thing.
PotashCorp also responded to this news, issuing a statement saying, “BHP Billiton’s offer is wholly inadequate and it would be inappropriate to speculate as to how this process may unfold. We are focused on running the business in order to meet and exceed the needs of our valued potash, phosphate, and nitrogen customers. Delivering on our commitment to customers has always been, and continues to be, our top priority. It is business as usual at PotashCorp.”
Also last week, Sinochem, a Chinese state-owned enterprise, hired HSBC Holdings PLC to advise it on its options regarding PotashCorp, according to The Wall Street Journal. Despite PotashCorp’s assurances that other prospective buyers are out there, BHP says the pool is limited.
Canadian officials continue to closely watch the situation, as any significant change to PotashCorp could impact the amount of royalties received by the Province of Saskatchewan. Lower potash prices would mean lower royalties going into the province’s coffers.
In the meantime, BHP said last week that due to the low amount of business PotashCorp conducts in the European Union, it does not believe any regulatory approval will be necessary there.
While some analysts have targeted a price of $170-$180 per share for PotashCorp shares (GM Aug. 23, p. 1), a Reuters survey of some 4 percent of BHP shareholders indicates their view that $155 a share should be BHP’s top price. Reuters said an earlier survey of PotashCorp shareholders said the deal could happen at $162 a share, with an analyst survey coming in at $157 a share.
Shareholders will obviously be guided by price. However, Sanjay Khanna, writing for The Huffington Post, argues that if they consider reputation, environmental and labor issues, as well as the stability of the potash market, they will disqualify China, saying as a buyer, it is the worst case scenario. Khanna, who is the director of Resilient People, an organization concerned with environmental and climate change issues, also isn’t too thrilled with BHP, saying Vale S.A. would be a better pick. Vale, however, has taken itself out of the running.