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Sep 01

Dukes flying in PotashCorp battle

Posted by dbedell in shareholder rightspotashpoison pillmergers and acquisitions, M&A;, DealsCanadaaustralia


Few people would have cared—or understood—three weeks ago if someone had said that potash is a hot commodity. But with Australia’s BHP Billiton and Canada’s PotashCorp in a dukes up, all out brawl right now for control of the Canadian fertilizer firm, potash—and the fertilizer industry—have taken on new significance.

On Tuesday they took the battle to fresh heights—or depths as the case may be—when PotashCorp accused the Aussie mining firm of “highly-unethical” behaviour, as the FT reports.

BHP, it seems, took the step of contacting PotashCorp’s customers to “sow seeds of doubt and confusion about the future of PotashCorp”, according to a letter to customers from PotashCorp’s head of sales—Stephen Dowdle.

Apparently, BHP’s director of potash marketing (catchy title) made calls to PotashCorp clients—and not to solicit potash orders.

Dowdle added in his letter to customers: “..we consider this contact to be inappropriate and highly unethical.”

BHP launched the unsolicited $39 billion bid for the Canadian firm in mid-August. Just a day later, PotashCorp rejected the offer and put in place a ‘poison pill’ shareholder rights plan—to extend future formal merger talks and consider alternatives.

One interesting aspect of the battle is that Canada has a potash cartel—of which PotashCorp is a member—and BHP wants to pull the firm out of the cartel, according to the FT. What exactly their aim would be in doing so is unclear, since it is effectively a government-approved price-fixing scheme.

PotashCorp holds a 20 percent market share of the world’s potash supply.

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