Alternatives to Billiton wait in wings: PotashCorp

The "poison pill" policy blocking a hostile takeover of PotashCorp is buying time for it to look at "competing transactions which are presently being considered," the fertilizer firm says.

Saskatoon-based PotashCorp, the biggest potash producer on the planet, is publicly urging its shareholders to reject a $130-pre-share, $38.6 billion hostile bid (all figures US$) from Australian mining giant BHP Billiton.

But while industry observers predict various major miners will step forward with competing bids, Billiton remains the only declared bidder for PotashCorp so far, thus blunting any suggestion that it should sweeten its offer.

PotashCorp’s poison pill, if or when triggered by an unsolicited purchase of over 20 per cent of its shares, would automatically flood the market with cut-price shares offered to every shareholder other than the unsolicited bidder, diluting the value of that bidder’s stake.

The poison pill or "shareholder rights plan" allows for a takeover through a "permitted bid" or a negotiated deal. However, PotashCorp noted in a release Wednesday, "Billiton chose not to make a permitted bid despite being in a position to do so."

The rights plan, in the meantime, continues to give Potash "sufficient time to explore and develop alternatives to enhance shareholder value," the company said.

Those include "competing transactions which are presently being considered or which might emerge in the future," PotashCorp said Wednesday, though it didn’t name any other specific suitors.

PotashCorp also reported Wednesday that Toronto’s TSX stock exchange has "deferred its consideration" of the Potash rights plan until the "appropriate securities commission" makes a decision about the plan or Potash shareholders ratify the plan through a vote.

TSX’s deferral is "typical for shareholder rights plans adopted while an issuer is aware of an actual or potential takeover bid," PotashCorp said.

The deferral, Potash said, "does not affect the validity of the rights plan or the rights issued thereunder and the rights plan remains in full effect."

"Highly suspicious"

Other alleged dealings in PotashCorp stock, meanwhile, have ended up with U.S. charges of insider trading against a pair of Spanish traders, both now the target of a related court order to seize their assets.

The U.S. Securities and Exchange Commission (SEC) on Tuesday announced charges against Juan Jose Fernandez Garcia and Luis Martin Caro Sanchez of Madrid, alleging both men made nearly $1.1 million in illegal profits in advance of PotashCorp going public with Billiton’s cash offer.

Garcia and Sanchez are alleged to have bought hundreds of "out-of-the-money" call option contracts for Potash stock in the days leading up to the Aug. 17 public announcement of Billiton’s bid.

Garcia and Sanchez jointly spent just over $61,000 to buy the contracts in U.S. brokerage accounts, the SEC said in its release Tuesday.

Then, right after the Aug. 17 announcement, Garcia and Sanchez sold all of their options and "tried to move offshore highly suspicious trading profits made just a few days before," according to Daniel Hawke, chief of the market abuse unit for the SEC’s enforcement division.

Garcia, the SEC said, is the head of a research arm of Banco Santander, a Spanish banking group advising Billiton on its Potash bid.

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