The head of Potash Corp went on the offensive against its unwanted suitor on Thursday, confidently describing BHP Billiton's $130-a-share hostile bid as "non-starter" even though a competing offer has yet to emerge. Potash Corp Chief Executive Bill Doyle, in an interview with Canada's Globe and Mail newspaper, said the value of his company far exceeds $170 per share and that it was still in discussions with other interested parties.
Potash Corp, the world's top fertiliser maker, flatly rejected BHP's $39 billion offer in August. Although its shares still trade at a premium to BHP's offer price, they have fallen nearly 10 percent from a high of $153.29 since the bid was announced. The stock closed at $140.90 on Thursday.
"Bill Doyle has a duty to maximise shareholder value, and I guess he's seeing Potash Corp's share price in the past few days starting to dip," said Barry Schwartz of Baskin Financial Services, which owns 35,000 Potash Corp shares. "He's come out to remind everybody today that there is still value here." Schwartz said he still thought BHP will eventually pump up its bid to $150 a share, and that it is still possible that a consortium led by a Chinese entity would emerge with a more generous bid.
Sinochem, the state-owned Chinese chemical group, is viewed as the most likely to lead a competing group, but a Bloomberg report on Thursday cast doubts on the likelihood of a Sinochem-organised bid. "I think investors that are ready to throw in the towel shouldn't just yet. This is not like buying a house, this is a huge deal, so it's going to take some time," Schwartz said.
While Doyle talked up the company's prospects, three small shareholders of Potash Corp launched a class-action lawsuit against the company, accusing it of disregarding their interests in rejecting BHP's offer. The shareholders, who own just 100 Potash Corp shares in total, allege that Potash Corp's board abused its position by refusing to consider BHP's $130-a-share offer and by adopting a poison pill - an anti-take-over defence - without seeking shareholder approval.
The three shareholders, Richard Painter, Susan Painter and Herbert Francl, allege that Potash's Corp's board violated US securities laws and the Canada Business Corporations Act. They filed their suit on Wednesday in a US District Court in Chicago. That's the same venue where Potash Corp filed a lawsuit seeking a preliminary injunction to block BHP from moving forward with its tender offer. Lawyers for both companies are set to face off in court on Friday, as the two sides squabble over the list of documents that are to be presented as part of the discovery process.
Potash Corp has asked the court for a protective order blocking BHP's request for documents it claims would give the Anglo-Australian miner an unfair business advantage. BHP, in a statement on Thursday, welcomed an independent report issued earlier this week that said a BHP take-over of Saskatchewan-based Potash Corp was preferable to a potential bid from a state-owned Chinese entity.