Bhp Billiton’s $40 Billion Hostile Bid for Potash Corp

FINA 6281 financial Modeling & Engineering

BHP BILLITON’S $40 BILLION HOSTILE BID FOR POTASH CORP

FINA 6281 financial Modeling & Engineering

BHP BILLITON’S $40 BILLION HOSTILE BID FOR POTASH CORP

Xin Gu

Niweina Song

Huiyang Zhou

Jaydeep Patel

Sergio F de la Garza

Xin Gu

Niweina Song

Huiyang Zhou

Jaydeep Patel

Sergio F de la Garza

Table of Contents

Introduction 2

Impacts on Financial Statements 3

Financial Statements Analysis 7

Objectives and Strategies of the Acquisition for BHP 8

Blocking a Hostile Takeover 9

Introduction

BHP Billiton Limited (BHP) is a leading global natural-resources company and a producer of aluminum, copper, coal, iron ore, gold, lead, silver, and diamonds. The company has operations in more than 25 countries and concentrated in Asia and Europe. The revenues of the company are over $50 billion and the market capitalization is about $144 billion.

Potash Corporation of Saskatchewan, Inc., (POT) is the world’s largest integrated fertilizer and producer of potash worldwide by capacity. The potash mines owned by POT are allocated in Canada.

BHP launched a $130-per-share bid for POT, in order to meet the company’s corporate strategy of developing and diversification. POT was valued at under $40 billion, which is a 20% premium above the most recent closing price. Later the bid was rejected by the board and management of POT quickly. In addition, the other stakeholders expressed their concern about the acquisition and tried to block the acquisition. Canadian government was concerned about the future operation change and economic shifts from the region. However, BHP showed the benefits of the acquisition, such as there would be no fundamentally change in POT’s operation and the management and workers can retain on their job position. Chinese government was concerned about the acquisition’s impact on the price and supply of fertilizers....