CALGARY — If BHP Billiton succeeds in taking over PotashCorp, some of the Saskatchewan company’s investments in other fertilizer firms may be up for grabs, according to a portfolio manager.
“BHP is never content to be a minority stakeholder in others’ businesses,” said Lei Wang of Thornburg International Value Fund, a PotashCorp investor.
PotashCorp (TSX:POT), the globe’s top potash producer, has a 22 per cent stake in Sinofert Holdings Ltd., a Chinese fertilizer distributor. Sinofert’s state-owned parent, Sinochem, has been rumoured to be weighing a possible counter-offer to BHP’s US$130-per-share bid for the Saskatchewan company.
PotashCorp also has a 14 per cent stake in Israel Chemicals Ltd., the world’s sixth-largest producer of potash, and a 28 per cent stake in Jordan-based Arab Potash Co..+
In addition, PotashCorp owns the equivalent of 32 per cent of Sociedad Quimica y Minera, a Chilean producer of specialty crop nutrients like lithium and iodine.
If Australia’s BHP is successful in its efforts to take over PotashCorp, there could be a “domino effect” on others in the industry, Wang said.
“Other fertilizer players such as Mosaic Co. (NYSE:MOS), Agrium (TSX:AGU) or even non-fertilizer players might want to snatch some ag businesses if available on market,” he said.
Agrium chief executive officer Michael Wilson has been quoted in Australian media reports as saying his company may be interested in some of PotashCorp’s non-core assets if BHP is successful in its quest and chooses to spin them off.
Agrium recently reached an agreement to buy Australian grain-marketer AWB Ltd. for $1.1-billion.
As a mining company, BHP may not have much interest in processing other fertilizers like nitrogen and phosphate — businesses PotashCorp has throughout the United States.
Agrium, on the other hand, earlier this year walked away from a hostile bid for U.S. nitrogen player CF Industries Holdings Ltd. (NYSE:CF) after a hard-fought battle that dragged on for more than a year.
PotashCorp has roundly rejected BHP’s US$130-per-share, or US$38.6-billion bid as too low, but a sweetened offer or white-knight bidder has yet to emerge.
PotashCorp shares have been trading well above the offer price, closing up 86 cents at C$155.85 Monday on the Toronto Stock Exchange but down $1.09 at US$146.64 on the New York Stock Exchange.
“BHP management need to recoup some cash so as to calm its own complaining shareholders on this deal’s price tag,” Wang said.
“The higher BHP final bidding price, the more likely BHP will dispose those non-core assets to please its own shareholders, in my opinion.”