TORONTO — Potash Corp. of Saskatchewan asked a U.S. court Wednesday to block a $39 billion hostile takeover by BHP Billiton on the grounds BHP has made “false statements and half-truths” to manipulate the perceived value of the Canadian company.
Australia’s BHP Billiton Ltd. began a hostile $130-per share takeover bid last month after Potash directors rejected its offer as wholly inadequate. The complaint is the latest defensive move by one of Canada’s largest mining companies and the world’s largest fertilizer company.
Potash’s filing with the U.S. district court for northern Illinois alleges that “because of BHP’s false statements, half truths and contradictions” Potash shareholders “lack clear and accurate information about BHP’s intentions and the true value” of its shares.
BHP said in a statement that it believes the lawsuit is “entirely without merit” and that it will contest it. BHP said Potash Corp.’s shareholders “should have the opportunity to decide on the merits of our offer.”
The lawsuit filed by Potash alleges that BHP has violated U.S. securities law by failing to adequately inform shareholders. Potash alleges BHP hasn’t been truthful about its plans to develop its own potash mine in Saskatchewan. Before bidding for Potash Corp. last month, BHP said it was focused on building a potash mine in Saskatchewan.
Potash Corp. said BHP only said that so it could scare investors into thinking BHP could flood the market with potash. Potash Corp. said the real goal was to drive down the stock of a company it wanted to buy.
“By conditioning the market for years to believe that BHP was primed to bring the full force of its worldwide financial and mining power to compete in the potash industry, BHP knew and intended to undermine investor confidence in the potash sector generally and PCS in particular creating an opportunity for BHP to acquire PCS shares for less than their intrinsic value,” the lawsuit states.
Potash noted that BHP made a bid just low enough that it would not trigger a vote by BHP shareholders to approve the transaction. BHP is required to seek shareholder support for any deal worth 25 percent or more of its market capitalization. According to Potash, BHP’s bid was worth about 23 percent of BHP’s market capitalization.
Potash Corp. is Saskatchewan’s largest revenue-generating company and the province is worried that BHP would operate at capacity and lower potash prices, leading to less revenue for the province.
BHP CEO Marius Kloppers is in Canada this week to meet with government officials, investors and media to win support for the bid. Chinese state-owned companies are also interested in making a bid for the company.
Canada’s federal government can block a foreign takeover if it’s not a “net benefit” to Canada. Canadian Prime Minister Harper has asked for Saskatchewan Premier Brad Wall’s input.
Wall has said he hasn’t heard anything to convince him that a BHP takeover Potash is a net benefit to his province or Canada.
Shares of Potash fell $1.19 to close Wednesday at $146.33. Potash shares had risen to more than $230 just before the recession started in 2008.
BHP hopes to diversify its assets and profit from rising fertilizer demand in China. BHP has extended the expiration of the bid by one month to Nov. 18.
Business, Pages 30 on 09/23/2010