BHP Billiton, the world's biggest miner, fired a warning shot to its take-over target Potash Corp and potential counterbidders, showing off its best half-year profit in two years and a hefty balance sheet. BHP, with a $39 billion hostile offer out for the top global fertiliser maker, said it was cautious on the short-term global outlook and that the economy in China, its biggest customer, would slow from recent highs.
-- US SEC charges 2 with insider trading on Potash Corp
"Following a broad recovery in prices for the majority of BHP Billiton's products, the short term outlook for commodities is mixed," the company said on Wednesday in announcing its results. But BHP is still in a strong position to raise its Potash offer, as widely expected, with $45 billion in debt lined up and annual cash flows of $24.5 billion. The group's net debt fell to $3.3 billion, with net gearing down to a mere 6 percent.
BHP Chief Executive Marius Kloppers is set to face questions from investors and analysts in London about the $130 per share bid, launched a week ago.
Shareholders are worried about the risks BHP is taking on, expanding into a market it has never served, as it aims to tap an expected boom in demand for potash from farmers trying to boost crop yields to feed fast-growing countries like China and India. Net profit before one-offs for January-June rose to $6.77 billion from $4.59 billion a year earlier, in line with analysts' forecasts of around $6.9 billion.
"BHP could probably go up to close to A$200 a share (in its Potash Corp bid)... In the absence of another bidder for those assets, BHP is doing the right thing in the sense it's basically offered a price... and is waiting for a response." One key question for shareholders will be whether BHP will be willing to raise its bid by more than 22 percent, which would require it to seek approval from its own shareholders for the deal under UK rules.
BHP also plans to ask a Canadian commission to end Potash Corp's poison pill early if the bid appears likely to receive regulatory approval, sources familiar with the matter said.
Potash Corp adopted a 90-day shareholder rights plan last week in response to BHP's hostile bid. BHP's bumper profits came as the US Securities and Exchange Commission charged two Spanish residents with insider trading in Potash Corp shares before BHP announced its bid.
The SEC alleged that the Madrid, Spain residents, one of whom was an equities derivatives trader with BHP adviser Santander, made nearly $1.1 million in profits using material non-public information to illegally trade Potash securities before the BHP announcement.
BHP shares have dropped 6.9 percent since it announced the bid for Potash Corp, underperforming a 2.6 percent dip in rival Rio Tinto as investors bet Rio would be a safer mining play.
Comments
Comments are closed.