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September 21, 2010
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Australian mining giant, BHP Billiton Ltd. (BHP) extended the buy-out offer made in mid August for Canada's Potash Corp. of Saskatchewan Inc. (POT), the world's biggest fertilizer manufacturer, for $130 per share, until November 18, 2010.
The all-cash offer was extended because BHP needs to provide certain information required by the Canadian Antitrust Authorities.
The offer was once rejected by Potash’s shareholders as being grossly inadequate. They believe that 16% premium over the August 16 closing price of $112.15 is an undervaluation in terms of the company’s global operating capacity and growing market demand. Thus, BHP will review its options and make further announcements in the fullness of time.
This will be the first major acquisition by BHP in recent times, should it happen. However, the company has entered into various joint ventures earlier. The latest being the one with Rio Tinto (RTP) in December 2009 to establish the Western Australia Iron Ore Production facility. The agreement is a milestone in delivering significant additional value to its shareholders.
Further, the company maintains a progressive dividend policy with a dividend of 42 cents per share in the first half of fiscal 2010, up from 41 cents in the first half of fiscal 2009. In fiscal 2009, dividend was 82 cents, an increase of 17.1% year over year. A continuous growth in dividend also raises shareholder value that inspires our optimism about the stock.
However, BHP faces foreign currency risks as the majority of its income is generated from international operations. Thus, over the longer term we maintain our Neutral recommendation. Being optimistic on the buy-out offer, the stock currently retains its short-term “Buy" rating with the Zacks #4 Rank. Following the announcement of extension, the share price rose by 2%.
Read the full analyst report on "BHP"
Read the full analyst report on "RTP"
Read the full analyst report on "POT"
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