Home
 
Choose Your City
Change City

PotashCorp accuses BHP of depressing shares

TORONTO - PotashCorp is suing its suitor, BHP Billiton, for allegedly driving down the Saskatoon-based fertilizer giant's shares over several years so it could be acquired on the cheap.

TORONTO - PotashCorp is suing its suitor, BHP Billiton, for allegedly driving down the Saskatoon-based fertilizer giant's shares over several years so it could be acquired on the cheap.

In a court filing Wednesday, Potash Corp. of Saskatchewan (TSX:POT) asked a U.S. court to block BHP Billiton's takeover bid unless more information is provided, describing the US$38.6-billion offer as "coercive," "built upon false and misleading statements and omissions" and "built upon BHP's manipulation of the perceived value of PCS."

BHP dismissed the lawsuit as "without merit" and said it will "contest it vigorously."

"While PotashCorp's actions seek to deprive its shareholders of a fully financed all-cash offer, we do not believe this lawsuit will interfere with or delay our offer. We strongly believe that PotashCorp’s shareholders should have the opportunity to decide on the merits of our offer," the company said in an emailed statement.

The 45-page court filing paints a nefarious picture of BHP, arguing the company had been studying PotashCorp since 2001 but had "choked on the share price."

To make the share price more palatable, BHP — one of the biggest mining companies in the world, with businesses ranging from coking coal to aluminum to diamonds — pledged to develop the first new potash mine in Saskatchewan in 40 years and flood the market with the mineral, PotashCorp alleged.

"BHP's announcements were strategically timed, intended to colour investors' views of the future for PCS, and designed to raise the spectre that BHP was the 800-pound gorilla about to become a major competitor of PCS," the filing said.

"Given its global size and strength, BHP's words and deeds have an impact that few other firms can match," it added.

PotashCorp's allegations haven't been proven in court.

Company spokesman Bill Johnson said an application has been made to get the case before a judge "as quickly as possible," and he expects it will be heard before the bid's Nov. 18 deadline.

The filing is the latest move by one of Canada's largest mining companies and the world's biggest producer of potash, an ingredient in fertilizer that's found in abundance in Saskatchewan.

PotashCorp's filing with the U.S. District Court for Northern Illinois also alleged that BHP has violated securities law by omitting key information, including the possibility that its own shareholders may have to vote on any deal because of its size.

It also accused BHP of misleading investors about its plans for how it would run PotashCorp if it successfully acquires the company, whether it would continue to develop Jansen, whether it would participate in the existing export cartel run by Saskatchewan's major potash producers, and whether it would sell PotashCorp's nitrogen and phosphates businesses.

"This disinformation campaign has left PCS investors without the truthful information they need to accurately value their shares and thus to evaluate the fairness of BHP's $130-per-share offer," the filing said.

It also argued BHP is being "unusually coercive" because it requires support from only half of PotashCorp shareholders, rather than the more routine two-thirds majority.

Richard Powers, a professor at the University of Toronto's Rotman School of Management, dismissed the lawsuit as a delay tactic, especially since it doesn't claim any monetary damages.

"I think it's just a shot across the bow. It's a delay tactic which gives them time for competing bids to materialize and to be vetted," Powers said.

PotashCorp said in its filing that shareholders will need "no fewer than 60 days" to review any new information released by BHP.

"BHP spent literally years sowing disinformation in the marketplace, attempting to undermine investor confidence in the value of PCS. The results of such a lengthy and multi-faceted campaign cannot be unwound immediately when BHP is at last forced to tell the truth," the filing said.

The filing may also force BHP to answer some questions that it has been vague on to date, including whether it will remain in the potash marketing cartel, Canpotex, run by Saskatchewan's three biggest potash producers.

However, Powers said courts are usually reluctant to intervene in a takeover fight.

"Unless they can show the statements are clearly misleading, I think it's unlikely it'll succeed," he said.

BHP chief executive Marius Kloppers has been meeting with Canadian business leaders, politicians and media this week to build support for the proposed takeover, which requires government and regulatory approvals.

He was in Ottawa on Wednesday to meet with politicians and regulators, including representatives of the NDP and the Liberals.

Ralph Goodale, deputy Liberal leader and a senior Saskatchewan MP, said he emphasized that BHP's potash marketing strategy can't hurt the province.

"Of crucial importance to Saskatchewan is any future marketing strategy that will apply to potash. Saskatchewan needs to know that such a strategy will be at least as beneficial, if not more so, to the province as the status quo," Goodale said.

Deputy NDP Leader Thomas Mulcair described his meeting with Kloppers as "very transparent and very open."

He said he spoke to the CEO about the importance of protecting Canadian jobs, and was heartened by BHP's promise to make Saskatoon the headquarters of its global potash operations.

PotashCorp executives have argued since the outset that the BHP offer is far too low, given the long-term value of the Canadian company's assets, including its stake in Canpotex

Canpotex is jointly owned by PotashCorp, Agrium Inc. (TSX:AGU), and Mosaic Co. (NYSE:MOS).

PotashCorp CEO Bill Doyle has predicted that other bidders will come forward but so far no white knight has emerged to challenge BHP. There have been unconfirmed reports that Doyle and other PotashCorp executives are attempting to put together a management-led buyout with backing from strategic investors in China and financial investors from pension funds elsewhere.

Shares in PotashCorp added 74 cents Wednesday on the Toronto Stock Exchange to C$151.29, well above BHP's US$130-per-share offer and a signal that players in the market believe there will be a bidding war or that BHP will have to hike its offer.

 
 
Consider AlsoFurther Articles