BHP Billiton bids $39 billion for Potash Corp

The bid reflects the Anglo-Australian mining giant's desire to capitalize on a resurgence in the fertilizer industry after its collapse during the global economic slowdown.

A steady rise in demand for crop nutrients like potash is expected to accelerate as the world's population grows. The sector has emerged as a hotbed of acquisitions over the past year, with consolidation in both North America and Russia.

The offer for Potash Corp is the biggest yet. Potash's capacity, concentrated in the Canadian Prairie province of Saskatchewan is the world's largest.

Investors signaled that the bid would rise. Shares of Potash Corp jumped 30 percent before the bell to $145.25 on the New York Stock Exchange, well above BHP's offer price of $130 a share.

Shares of rival fertilizer producers also rose. Shares of Germany's K+S were up 6 percent, while those of Norwegian fertilizer maker Yara rose 5.8 percent. Shares of North American rivals Mosaic Co and Agrium Inc also jumped before the bell.

In June, BHP Billiton said it sees potash as an ideal fit within its portfolio of commodity products and is focused on developing its potash projects in Western Canada into a world-class basin play.

Three months earlier, a nearly year-long four-way takeover battle involving four North American producers -- Agrium, Yara, CF Industries and Terra Industries -- culminated with CF's acquisition of Terra Industries.

In Europe, Russia is now consolidating its potash industry into a single national champion that would rank as the world's second biggest producer behind Potash Corp.

Krelim-backed billionaire tycoon Suleiman Kerimov has bought more than 50 percent of Russian potash giants Uralkali and Silvinit with some business allies. Market sources expect the state to support a merger between the two.

BHP OFFER

BHP offered $130 per share in cash for each share of Potash. That is only a premium of 16 percent to its Monday closing of $112.15 on the New York Stock Exchange.

BHP's bid is richer than Potash Corp's 52-week high of $128.42, but well below the company's all-time-high of more than $240 a share, which it touched in mid-2008.

Potash Corp Chairman Dallas Howe said in a statement that the BHP proposal substantially undervalues the company.

The company has adopted a shareholder rights plan to guard against any hostile moves and said it was not in the best interests to enter talks with BHP.

Potash Corp, which set the trigger at 20 percent under the rights plan, said the board authorized the issuance of one share purchase right for each common share of Potash Corp outstanding as of the close of business on August 16.

"We believe the timing of your proposal is highly opportunistic given that, among other things, the industry is still in the early stages of a recovery," Howe said.

"Global demand for food is steadily increasing, creating an attractive operating environment for the entire fertilizer industry and, with our premier position, Potash Corp is uniquely poised to benefit," Chief Executive Bill Doyle said.

BHP said it continues to review its options and it will make a further announcement in due course. BHP shares were 1.4 percent lower on the London Stock Exchange at 1934 pence.

BofA Merrill Lynch, Goldman, Sachs & Co. and RBC Capital Markets are acting as financial advisors to Potash Corp and Jones Day and Stikeman Elliott are acting as its legal advisors.

(Reporting by Euan Rocha in Toronto and Bhaswati Mukhopadhyay in Bangalore; editing by Frank McGurty and Janet Guttsman)