PotashCorp shares flutter on bid speculation

Shares of takeover target Potash Corporation of Saskatchewan traded up and down, then up again, on Monday as investors tried to guess the outcome of the $38.6-billion US hostile bid for the company.

Shares of takeover target Potash Corporation of Saskatchewan traded up and down, then up again, on Monday as investors tried to guess the outcome of the $38.6-billion US hostile bid for the company.

On the upside, a report in Britain's Sunday Times citing sources close to the deal said Anglo-Australian bidder BHP Billiton might be ready to raise its $130-a-share offer.

The paper's sources said the bid could rise by as much as 10 per cent.

Dave Carter, production supervisor at the PotashCorp mill in Rocanville, Sask., checks the product. ((David Stobbe/Reuters))

Then the Reuters news service reported Monday from Melbourne that a person close to the deal said BHP would not raise its offer before Nov. 3, when the Canadian government is expected to decide whether to block BHP.

A spokeswoman for BHP told The Canadian Press that the company had no immediate comment on the Times report.

In trading on the Toronto Stock Exchange, PotashCorp shares fell $1.50, regained the loss and added more than $1.50, and finally slipped again. The stock finished the day up $1.20 at $148.70. 

PotashCorp has said the BHP bid is too low, but on top of the conflicting news about a possible higher bid, PotashCorp investors have to deal with political uncertainty.

While the federal government routinely approves foreign investments, Saskatchewan and other provinces are opposed to the BHP bid.

The governing Conservatives must choose between the benefits of remaining open to foreign investors and the potential backlash if it approves a takeover. All but one of Saskatchewan's 14 MPs are Conservatives, and Saskatchewan Premier Brad Wall is a strong supporter of the government.

Three-month TSX trading in PotashCorp

Meanwhile, analysts are suggesting that PotashCorp stock is worth more than the bid and the current price, based on the outlook for fertilizer. Potash is a fertilizer component.

Brian MacArthur, an analyst with UBS, says the shares could hit $175 US.

"Given the improved fertilizer market, we believe the shares would be trading about $130 per share in the absence of a bid," he said in a note to clients Monday.

Credit Agricole Securities analyst Mark Connelly is looking for a $170-a-share price target because potash markets are tight and "producers have the upper hand."

Scotia Capital has estimated PotashCorp shares could be worth $142 without a takeover.

Ottawa considers BHP bid

The federal government has to assess whether the deal is of "net benefit" to Canada. It has set a Wednesday deadline for revealing its decision.

If Ottawa approves the acquisition, BHP could ask PotashCorp shareholders to vote on its offer, or try to win the company's support with a higher bid.

PotashCorp disclosed recently it had spoken to 15 potential bidders about making a competing offer for the company.

"The PotashCorp board believes that there is a real and substantial probability that alternatives to the BHP offer will emerge that will increase shareholder choice and enhance shareholder value," the company said.

With files from The Canadian Press