Thursday, September 16, 2010

Potash chief lost £4m in BHP Billiton bid

Bill Doyle sold shares two months before BHP's bid pushed Potash's value up 24%

By Simon Goodley
Thursday 16 September 2010

A Potash Corp holding centre facility near Saskatoon.
Photograph: David Stobbe/Reuters

Bill Doyle, the chief executive of Potash Corp of Saskatchewan, cost himself $6.7m (£4.3m) by cashing in share options this summer, two months before BHP Billiton's $39bn bid for the company was revealed.

In May and June, Doyle sold 134,200 shares at an average price of $98.71, 24% below BHP's $130 a share offer price which the Potash board described as "grossly inadequate".

The shares were part of Doyle's stock option package which are cancelled after 10 years. This award was due to expire on 21 November, but had Doyle held on for five months the current Potash share price of around $148 would imply additional profits of $6.7m. Doyle's other holdings mean he is set to make more than $400m if Potash is sold.

His massive personal wealth has added a dimension to the already dramatic bid for the fertiliser group, which has seen him trying to fend off BHP's approach.

Potash claims that other bidders could emerge, and newspaper reports in Canada claim the company is trying to stitch together a consortium led by China to back a leveraged management buyout. The approach would include a large chunk of capital from a Chinese resource company or investment fund, with smaller contributions from international sovereign wealth funds and possibly Canadian players. Rival potash producer Mosaic has also been tipped as part of the consortium.

Analysts said the consortium looked unwieldy and may fall foul of regulatory hurdles.

Last month the Saskatchewan government said it was unlikely to support a takeover of the Saskatoon-based company by a sovereign wealth fund, or any other large potash-buying nation because it fears the motive would be to deflate the price of the region's most important asset.

A rival bid from the Chinese had been seen as Potash's best hope of avoiding the clutches of BHP after its rivals Vale and Rio Tinto signalled they would not be launching a rival bid.

Potash has spent the past month trying to persuade the market that BHP was attempting "an opportunistic effort to transfer value to its own shareholders" and has been explaining why it believes its shares will rise as the demand for potash increases and drives up prices.

Potash, the raw material, is used as a fertiliser, as livestock feed supplements and in industrial products such as soaps and water softeners.

Shares in Potash Corp edged up $1.44 to £148.57, while BHP shares slipped 2.33p to £19.61.

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