Potash Corporation of Saskatchewan Inc. (PotashCorp) on August 17 announced that its board of directors has received and unanimously rejected an unsolicited proposal from BHP Billiton Limited to enter into a transaction under which BHP Billiton would acquire PotashCorp for US$130 per share in cash. PotashCorp's board of directors thoroughly reviewed BHP Billiton's unsolicited proposal with the assistance of its independent financial and legal advisors and concluded that the proposal is grossly inadequate and it is not in the best interests of its shareholders for PotashCorp to enter into discussions with BHP Billiton.
"The PotashCorp board of directors unanimously believes that the BHP Billiton proposal substantially undervalues PotashCorp and fails to reflect both the value of our premier position in a strategically vital industry and our unparalleled future growth prospects," said PotashCorp chairman Dallas J. Howe. "After careful consideration, and in the interest of transparency, our board determined to proactively disclose BHP Billiton's unsolicited, non-binding proposal to our shareholders. We believe it is critical for our shareholders to be aware of this aggressive attempt to acquire their company for significantly less than its intrinsic value. The fertilizer industry is emerging from the recent global economic downturn, and we feel strongly that PotashCorp shareholders should benefit from the current and potential value of The company. We believe the BHP Billiton proposal is an opportunistic effort to transfer that value to its own shareholders."
PotashCorp president and chief executive officer Bill Doyle commented, "Global demand for food is steadily increasing, creating an attractive operating environment for the entire fertilizer industry and, with our premier position, PotashCorp is uniquely poised to benefit. We believe our board and management team are successfully executing our business plan and producing strong results. With our unmatched asset base and proven strategies, we believe we are well positioned to exceed the expectations of customers around the world and deliver compelling value to our shareholders."
In making its determination, the PotashCorp board of directors considered a number of factors including:
The BHP Billiton Proposal Fails to Reflect PotashCorp's Prospects for Continued Growth and Shareholder Value Creation: PotashCorp is poised to deliver strong earnings growth as agricultural fundamentals continue to strengthen, global demand for its products – especially potash – increases, and its strategic investments in new potash capacity uniquely position it to capture a disproportionate share of demand growth. The company firmly believes it is on the verge of an inflection point, where potash demand will return to historical trend-line growth, supply will tighten, and pricing will improve. The powerful long-term drivers of the fertilizer business – population growth and improving diets in developing nations – changed little as a result of the global downturn, and the catalysts expected to fuel near- and medium-term demand are accelerating. A rising demand for food – coupled with historically low global grain inventories – support a powerful period of growth for agriculture. The PotashCorp board believes that no other company is better positioned to capitalize on these growth opportunities. The board is confident that PotashCorp can deliver significantly greater value to its shareholders than BHP Billiton's inadequate proposal.
PotashCorp is a Uniquely Valuable Asset: PotashCorp is uniquely positioned as the premier global producer with unparalleled potash assets in an industry characterized by substantial barriers to entry, few producers and no known product substitutes. The BHP Billiton proposal fails to adequately compensate PotashCorp shareholders for this strategic position and scarcity value. In addition, the BHP Billiton proposal does not reflect PotashCorp's substantial recent and ongoing investments to increase capacity, the value of PotashCorp's strategic equity investments in China, Chile, Jordan and Israel, and its unmatched ability to meet the needs of North American customers and growing offshore potash markets.
The BHP Billiton Proposal Represents a Wholly Inadequate Premium for Control: At US$130 per share, BHP Billiton is proposing a premium of only 16 percent over PotashCorp's August 16, 2010, closing stock price. This low premium does not reflect the strategic importance, scarcity value and quality of PotashCorp's assets, or the unique opportunity PotashCorp affords to BHP Billiton or any other acquiror. Furthermore, the premium offered is substantially inferior even to average control premiums globally and in Canada.
The BHP Billiton Proposal is Timed to Deprive PotashCorp Shareholders of Full Value: BHP Billiton is opportunistically attempting to transfer the upside value in PotashCorp to its own shareholders at the expense of PotashCorp shareholders. PotashCorp believes the timing of the BHP Billiton proposal is highly opportunistic and an ill-disguised attempt to exploit an anomaly in the equity market valuation of PotashCorp. PotashCorp believes that BHP Billiton intentionally launched its proposal just as the fertilizer industry emerges from an unprecedented demand decline associated with the global downturn in order to seize the value that PotashCorp is poised to create. The company is confident that, given the demand growth and margin potential anticipated in the months and years ahead, the continued execution of PotashCorp's strategic plan would deliver substantially more value to PotashCorp shareholders than the BHP Billiton proposal.
