The hostile takeover bid by BHP Billiton for the Canadian Potash Corporation of Saskatchewan will be worthy of a Harvard Business Review case study, but is also a fascinating example of the adventures and misadventures, the opportunities and the considerable failings of global capitalism at work, especially as they involve China Inc.
There had been rumours from early last year that the Australian mining giant had Potash in its sights. So it should have been no surprise when BHP last month launched a US$130 a share bid totalling US$39 billion for the Canadian company.
It was a brilliantly opportunistic bid. BHP Billiton's offer was way above the languishing Potash shares, which hit a 52-week low of US$88.68 in July, but soared towards US$150 after BHP made its offer.
BHP, cleverly, bid when potential rivals, notably Rio Tinto and Vale of Brazil, are preoccupied. World potash prices were at lows of US$400 a tonne in the second quarter, though they are expected to rise rapidly on fears about shortfalls in global food production.
Potash Corporation is the world's biggest producer of the product, accounting for about 23 per cent of global supply. It is also an important producer of nitrogen (2 per cent of global supplies) and of phosphates (6 per cent of the world's supplies), which with potash are the main nutrients in producing fertiliser. China takes about 7 per cent of Potash Corp's output.
Bill Doyle, the chief executive of Potash Corporation, in his terse statement rejecting BHP's bid, declared that, 'Global demand for food is steadily increasing, creating an attractive operating environment for the entire fertiliser industry and, with our premier position, Potash Corp is uniquely poised to benefit.'