BHP going after PotashCorp again: report
Shares in Potash Corp. of Saskatchewan (TSX, NYSE:POT) rose 1.36% in Toronto to $34.35 Tuesday morning after media reports hint at a potential bid from BHP Billiton (ASX, NYSE:BHP).
According to an article published by The Globe and Mail (subs. required), while there are no concrete signs a deal is under way, speculation is mounting as the landscape in the industry has shifted enough to make a buyout attractive.
BHP, in partnership with K+S AG, has been working on mine projects in Potash Corp’s backyard, which could erode the Canadian exporting and marketing firm (Canpotex) market clout.
And while BHP has not yet given the full go-ahead to its touted $3.8 billion Jansen mine, the company recently committed to spending an additional $2.6 billion over the next few years, just to gain access to the deposit.
Because Potash Corp. owns the most potash-producing capacity in the world, a change of balance in the sector with fewer actors owning bigger stakes of the market, would significantly impact the crop nutrient’s value.
That’s what happened last summer after Potash’s chief rival, Russia’s Uralkali (LON: URALL) quit the Belarusian Potash Co. trading partnership and said it would maximize sales volume.
In 2010 the Canadian government’s rejected BHP’s $40 billion hostile takeover bid for Potash Corp. in a move analysts believed at the time it would deter any potential suitors from approaching the company in the future.
Global demand for potash is expected to rise in 2014, but key importers in China and India have for the past couple of years demonstrated an ability to drive deeper discounts on contracted volumes due to plentiful supplies.