Wednesday, August 25, 2010

A Potash Auction?

The giant Anglo-Australian mining concern BHP Billeton (LSE: BLT) -- which has a stock symbol that reminds me of a sandwich -- has bid $38.6 billion for Potash Corp., of Canada, and has also put on something of a charm offensive, seeking to persuade Canadians that locals will continue to run the place.

Canadian regulators have taken a permissive attitude of late toward foreign companies who want to take over the mining concerns of the Great White North. Xstrata, of Switzerland, bought Falconbridge (a nickel miner) without a fuss, for example.

Anyway, the key question here is: how much will Potash go for? Can the incumbent board set off an auction? You need more than one bidder for a good auction. Potash is apparently in discussions with a couple of Chinese concerns: the Sinochem Group and Hopu Investment Management.

As you can see from the chart, the course of BHP's stock price has been pretty rocky since April. Nonetheless, the company has deep pockets, and analysts are convinced it can sweeten its offer if it has to.

Indeed, Marius Kloppers, the CEO of BHP, has referred to the bid -- which stands at US$130 per share, as "full and fair." If he had wanted to say "last and best," he would have done so.

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