Last month, Potash Corp. filed a lawsuit against BHP, which seeks a preliminary injunction to block BHP from moving ahead with its proposed bid. Saskatoon, Saskatchewan-based Potash Corp in August flatly rejected BHP’s $130 a share offer as “grossly inadequate.” BHP argues that the Potash Corp. lawsuit fails to identify any misleading statement or material omission on the part of BHP.
“PCS’s (Potash Corp.’s) complaint offers only implausible, uncorroborated and largely irrelevant speculation, drawn from material in the public record, which shareholders are equally able to review in order to draw their own conclusions,” BHP said in a court filing.
The Anglo-Australian miner intends to present its case before a judge in the US District Court in Chicago, on Oct. 7.
BHP argues that in hostile takeovers, the target company’s board has every right to dispute relevant, or not so relevant facts with its suitor, but the final decision should be in the hands of the shareholders.
“Once both sides’ positions are in the public domain, it is up to the shareholders, rather than the Court, to resolve the dispute,” said BHP.
Potash Corp.’s suit claims that BHP sought to drive down the Canadian company’s perceived value by trumpeting its own plans to enter the potash business.
That way, the suit argues, BHP could eventually make a bid for Potash Corp. at a low enough price to avoid triggering a BHP shareholder vote.
Under British law, a shareholder vote is required if a company attempts a takeover that exceeds 25 percent of its own market valuation.
At $39 billion, or $130 a share, BHP’s current offer allows it to avoid a vote that could scupper a deal.
“That BHP Billiton would invest approximately one billion dollars over a period of years to develop its own potash business in an elaborate ruse to depress the value of PCS’s stock defies common sense,” said BHP in response to Potash Corp.’s allegation.
Before bidding for Potash Corp., BHP was focused on building the huge Jansen potash project in Saskatchewan. Slated to begin production around 2015, Jansen has the potential to rank as the world’s largest potash mine.
BHP has stated that it plans to continue to develop Jansen, whether, or not it succeeds in its attempt to acquire Potash Corp.
Potash Corp. has asked the court to resolve the litigation before the Nov. 18 deadline on BHP’s bid. Earlier this week, Judge David Coar ruled that he would allow the discovery process of the lawsuit to proceed.
As part of the discovery process, Potash Corp. have asked that BHP produce a long list of documents that include BHP’s statements regarding investments in the potash industry and the minutes of BHP’s board meetings that relate to the potash sector. BHP was also asked to provide any documents on its plans to develop its Jansen potash project in Saskatchewan.
The company has also requested that some of BHP’s top executives present depositions in relation to the matter.
Judge Coar has said that the court would conduct a hearing on Potash Corp.’s request for a preliminary injunction to block BHP from proceeding with its tender offer on Nov. 4, ahead of the deadline on BHP’s bid.
