The scuttlebutt this weekend is that BHP is considering raising its bid for Potash by 10%.The news was first reported in UK’s Sunday Times, but the company is right now denying it. Instead, according to reports in Canada, BHP’s big priority is to win over the various regional Canadian governments that could play a role in blocking the deal.
But regardless of what BHP says publicly, it’s clear that if they are to ultimately prevail, a higher bid will be required.
First of all, Potash is currently trading at $145, and the bid on the table is only $130, so that’s a non-starter.
Beyond that, the situation has fundamentally changed since the initial bid this summer.
You’ve probably heard that food prices have been on a tear, and so fertiliser/potash prices have followed suit.
And in general all stocks are just higher, which has cut into the premium that Potash investors might have had.
Not surprisingly, in Potash’s latest quarterly, the BHP bid was a major focus of the company’s presentation.
We’ve selected some highlights regarding the nature of the industry, the boom in food prices, and the bid itself.