Potash Sues BHP in U.S. to Block `On the Cheap' $40 Billion Takeover Offer

Potash Corp. of Saskatchewan Inc. sued BHP Billiton Ltd., the world’s largest mining company, in Chicago federal court to prevent it from acquiring the fertilizer maker with a $40 billion hostile offer.

BHP sought to improve its chances of acquiring Saskatoon- based Potash Corp. “on the cheap” by seeking to “drive down” its share price prior to the Aug. 17 offer, Potash Corp. said today in the complaint.

Potash Corp., the world’s largest producer of its namesake crop nutrient, rejected Melbourne-based BHP’s $130-a-share offer as too low. Potash Corp.’s U.S. shares have advanced 30 percent since Aug. 16, the last trading day before BHP made its proposal, and are trading above the bid price, indicating investors expect a higher offer.

“The suit is a defensive mechanism, but also an offensive tool because it attempts to point out why the stock is relatively inexpensive on a stand-alone, no-transaction basis,” Louis Meyer, an analyst at Oscar Gruss & Son Inc. in New York, said in a telephone interview. “The rationale is that the best defense is a good offense.”

The lawsuit is “entirely without merit,” BHP said today in an e-mailed statement, adding that it does not expect the court filing to interfere with or delay its all-cash offer.

“This lawsuit seems to be their answer to the absence of another bidder emerging,” Ruban Yogarajah, a BHP spokesman, said today by telephone.

Kloppers in Ottawa

Potash Corp. fell $1.19, or 0.8 percent, to $146.33 at 4:15 p.m. in New York Stock Exchange composite trading. BHP climbed 41 pence, or 2.1 percent, to 2,000 pence in London.

BHP Chief Executive Officer Marius Kloppers is scheduled to meet with lawmakers in Ottawa today.

Potash Corp. alleges BHP made “false and misleading” statements about the offer. BHP allegedly sought to depress the value of Potash shares to make an acquisition possible by pledging to develop its Jansen project in Saskatchewan and to “run its new mine flat out, flooding the market with potash,” according to the court filing.

BHP’s announcements were “designed to raise the specter that BHP was the 800-pound gorilla about to become a major competitor” to Potash Corp., the Canadian company said in the filing.

Yogarajah said it was “absurd” to suggest that BHP’s Jansen project was a “ruse” designed to undermine Potash Corp.’s share price. “We have repeatedly reaffirmed to the governments of Canada and to Saskatchewan our commitment to advancing Jansen,” he said.

Shareholder Vote

BHP also failed to inform Potash Corp. shareholders that it was “reasonably likely” that BHP investors would have to vote on the takeover, Potash Corp. said. Under U.K. listing rules, a vote is mandatory if the value of an acquisition matches or exceeds 25 percent of the acquirer’s market value.

BHP’s offer came “before an expected spike in worldwide potash demand that would surely lead to increases” in Potash Corp.’s stock price and require a BHP shareholder vote, Potash Corp. said.

Potash is seeking a court order barring BHP from taking further steps to consummate its tender offer or acquire shares and directing the prospective purchaser to make “complete corrective disclosure” to Potash shareholders about prior allegedly misleading statements.

The Canadian company is also seeking a 60-day freeze on BHP taking any further steps to acquire it, until “misleading statements to the market have dissipated and shareholders have had the opportunity to review and consider the corrective disclosures,” according to the lawsuit.

The case is Potash Corp. of Saskatchewan v. BHP Billiton, 10-06024, U.S. District Court for the Northern District of Illinois (Chicago).

To contact the reporters on this story: Christopher Donville in Vancouver at cjdonville@bloomberg.net; Andrew M. Harris in Chicago federal court at aharris16@bloomberg.net.

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net; David E. Rovella at drovella@bloomberg.net.

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