World&#39;s Top Miner BHP Makes Unsolicited Big For Mega Fertilizer Player Potash (BHP, POT, MOS)

Update: For more background on this deal, see this June investor presentation from Potash >

Original post: BHP Billiton, the world's biggest raw commodities miner, has announced an unsolicited takeover bid for Canadian fertilizer player Potash.

Potash has rejected the bid, which values the company at $38.5 billion -- just 16% above its current value -- for being "grossly inadequate."

Potash has also instituted a poison pill.

Here's the key section from Potash's announcement:

"The PotashCorp Board of Directors unanimously believes that the BHP Billiton proposal substantially undervalues PotashCorp and fails to reflect both the value of our premier position in a strategically vital industry and our unparalleled future growth prospects," said PotashCorp Chairman Dallas J. Howe. "After careful consideration, and in the interest of transparency, our Board determined to proactively disclose BHP Billiton's unsolicited, non-binding proposal to our shareholders. We believe it is critical for our shareholders to be aware of this aggressive attempt to acquire their company for significantly less than its intrinsic value. The fertilizer industry is emerging from the recent global economic downturn, and we feel strongly that PotashCorp shareholders should benefit from the current and potential value of the Company. We believe the BHP Billiton proposal is an opportunistic effort to transfer that value to its own shareholders."

PotashCorp President and Chief Executive Officer Bill Doyle commented, "Global demand for food is steadily increasing, creating an attractive operating environment for the entire fertilizer industry and, with our premier position, PotashCorp is uniquely poised to benefit. We believe our Board and management team are successfully executing our business plan and producing strong results. With our unmatched asset base and proven strategies, we believe we are well positioned to exceed the expectations of customers around the world and deliver compelling value to our shareholders."

Some key ideas to think about are what this says about BHP Billiton's growth outlook for food demand, what it says about the use of corporate cash, and just what a possible megadeal like this says about confidence, etc.

Presumably this won't end the BHP/Potash story (it's just the beginning) and naturally it will provoke plenty of interest in other fertilizer players, like Mosaic.

As you can see, Potash remains well of pre-bus highs.

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