Potash Corporation of Saskatchewan (PotashCorp), the world's largest fertiliser producer, today rejected a $38.6-billion in cash takeover offer from BHP Billiton, the world's largest mining company.

BHP Billiton today confirmed that it had made an approach to PotashCorp regarding a possible acquisition of PotashCorp and offered $130 per common share, a premium of 16 per cent to the company's share price on 16 August, but the board of PotashCorp has not agreed to engage in discussions.

''BHP Billiton continues to review its options and will make a further announcement in due course,'' said the Anglo Australian miner in a statement.

Dallas Howe, chairman of Potash, said that BHP Billiton's offer failed to ''reflect both the value of our premier position in a strategically vital industry and our unparalleled future growth prospects."

''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,'' he added.

Saskatchewan-based PotashCorp said BHP Billiton is trying to exploit the current downturn in the market for potash.

''The fertiliser 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.''

Knowing the aggressive methods deployed by BHP Billiton during its takeover attempt of rival Rio Tinto in 2007, Potash armed itself with shareholder rights plan or commonly known as a ''poison pill'' defence in order to thwart anyone acquiring more than 20 per cent of the company.

 The Rights Plan permits the acquisition of control of PotashCorp through a "permitted bid", a "competing permitted bid" or a negotiated transaction.
 
In rejecting BHP Billiton's offer, PotashCorp said that it is poised to deliver strong earnings growth as agricultural fundamentals continue to strengthen, global demand for its products – especially potash – increases, and its strategic investments in new potash capacity uniquely position it to capture a disproportionate share of demand growth.

The company firmly believes that potash demand will return to historical trend-line growth, supply will tighten, and pricing will improve.

The powerful long-term drivers of the fertilizer business – population growth and improving diets in developing nations – changed little as a result of the global downturn, and the catalysts expected to fuel near- and medium-term demand are accelerating. 

The Board said that it is confident that PotashCorp can deliver significantly greater value to its shareholders than BHP Billiton's inadequate proposal.
 
PotashCorp is the world's largest fertilizer company by capacity producing three primary plant nutrients and a leading supplier to three distinct market categories: agriculture, animal nutrition and industrial chemicals.

The company holds 22 per cent of the world's potash production capacity, 2 per cent of nitrogen production capacity and 6 per cent of phosphate supply.

It holds the right to mine 773,474 acres of land in Saskatchewan; and 58,263 acres of land in New Brunswick in Canada.

But the global recession saw its revenues fall from $9.0 billion in 2008 to $3.7 billion in 2009 and net income erode from $3.5 billion to $987.8 million for the same period.

The global fertiliser industry is undergoing consolidation and the current bid by BHP Billiton comes after Canada's fertiliser group Argium yesterday made a cash counter offer of A$1.2 billion ($1.1 billion) for Australia's AWB Ltd. (See: Canada's Agrium makes A$1.2-bn counter offer for Australia's AWB) 

Argium counter offer came in response to Australia's GrainCorp on 31 July offering to buy AWB for A$855 million ($770 million) to become the country's biggest wheat exporter. (See: GrainCorp to buy AWB to become Australia's largest wheat exporter)