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Aussie Mining Giant Clears U.S. Hurdle In Hostile Bid For Canada’s Potash

Posted  October 4, 2010

Australian mining giant BHP Biliton Ltd. Has won its first regulatory approval – from U.S. antitrust authorities – in its $39 billion dollar hostile bid to take over Canada’s Potash Corp., the world’s largest producer of potash, a key crop nutrient used in fertilizer.

BHP has announced that the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice have terminated the HSR mandatory waiting period early, permitting BHP to proceed with its bid.  BHP still requires antitrust clearance from other regulatory authorities, including Canada’s Competition Bureau, which has sought further information regarding the proposal, and the Investment Canada review, for which BHP must prove its offer is of “net benefit to Canada.”

Despite these remaining regulatory hurdles, BHP has stated that it “remains confident” that it will secure the remaining antitrust approvals necessary to complete its takeover.

In its bid, BHP seeks to acquire all of the issued and outstanding common shares of Potash along with any associated rights under Potash’s Shareholder Rights Plan.  BHP offered Potash shareholders $130 per-share, a 20 percent premium over the NYSE August 11 closing price.  Potash rejected BHP’s offer as too low, commenting that BHP’s bid was “grossly inadequate” and “highly opportunistic.”  Potash’s board of directors has publicly encouraged its shareholders to reject the bid.

To further block BHP from acquiring Potash, Potash set up a “poison pill” policy on its shares to block any bidder from completing a hostile takeover.  The “poison pill” is triggered by an unasked-for purchase of over 20 per cent of its shares.  In that instance, Potash would automatically flood the market with cut-price shares that would be offered to every shareholder other than the unsolicited bidder.  This has the effect of diluting the value of the unsolicited bidder’s stake.

Potash has also filed a complaint in federal court alleging that BHP has engaged in various federal securities violations.  Specifically, Potash alleges that BHP has made false and misleading statements to manipulate stock prices and mislead stockholders.  Potash claims that BHP attempted to erode the stock prices by disseminating phony plans to enter the potash industry, which, if true, would flood the market with potash and devalue Potash’s stock.

BHP responded to the allegations by saying that “this lawsuit is entirely without merit and we will contest it vigorously.”  BHP further stated that Potash seeks to “deprive its shareholders of a fully financed all-cash offer” and that the lawsuit will not “interfere with or delay our offer.”

BHP’s offer has been extended to November 18, 2010 to allow completion of the regulatory review in Canada.

Tagged in: Antitrust Enforcement, International Competition Issues,