As Crop Demand Grew, Potash Became a Target

PotashCorp of Saskatchewan (POT) Chief Executive Officer William J. Doyle says he has tasted what's driving global demand for fertilizer on the Chinese mainland. "When I first went to China in 1979, we were eating monkey brains, crickets, and sea urchins," Doyle, 60, said in an interview. "Today you go to China and they ask you if you want to split a beef tenderloin."

As China booms, so does its appetite for meat, powering global demand for crops used as animal feed. Growing use of fertilizer to boost those crop yields has turned Potash, which controls 20 percent of the world's supply of its namesake fertilizer component, into Canada's fifth-largest company by market capitalization. That demand also spurred BHP Billiton (BHP), the world's biggest mining company, to make a $40 billion hostile bid for Potash last week.

Doyle, a former fertilizer salesman who runs Potash from offices in Saskatoon, Saskatchewan, and his native Chicago, rejected the $130-a-share offer as "beyond opportunistic" and is pursuing discussions with other potential investors. China's Sinochem Group and Brazil's Vale (VALE) made initial inquiries with Potash's board in late August about possible talks, a person with knowledge of the matter said. Potash shares have advanced 30 percent since Aug. 17, when the company disclosed BHP's approach.

CEO Scrutiny Over Pay

Since Doyle was appointed CEO in 1999, Potash has seen average annual returns of 26 percent, more than triple the 6.8 percent advance of the S&P Toronto Stock Exchange Composite Index. While delivering to shareholders, the Potash boss has drawn criticism from farmers worldwide after potash prices soared two years ago. He's also been grilled by union officials about his pay, which last year totaled $9.7 million. The 2.93 million shares and options he held, according to a Feb. 19 filing, would have a value of $445 million based on BHP's offer.

Doyle brushes aside such concerns. "These comments about what I make or might make, I just laugh at that," Doyle says. "I really don't care about that. I work and do what I do because I love it."

Doyle grew up near Chicago before graduating from Georgetown University in 1972. After college, he set out on a motorcycle trip across the back roads of Europe. "I saw agriculture in 37 different countries, sleeping outside 13 out of 14 months, by myself, and came back and said, 'You know what? Those people with their fingers in the dirt and harvesting something every year, that's what I want to be associated with,' " he says. After the trip he joined International Minerals & Chemical, a maker of potash and crop nutrients. By 1982, he was vice-president for export sales.

Doyle moved to Potash in 1987 at the invitation of Charles E. "Chuck" Childers, an IMC executive hired by Saskatchewan to improve performance at the company, then owned by the provincial government. "We made a deal with them: We'll come, but only if you let us run it like a business," Doyle said in a May 2008 interview. "You take care of the social and political agenda, but you stay out of the business."

Doyle was available only because IMC didn't offer him one of the retention bonuses given to employees considered at risk of quitting to join Childers. "Bill was probably not one of their key people," Childers, 77, said from his home in Denver. "They thought I needed a domestic salesperson, but I surprised them."

Price Increases

Potash shares began trading in Toronto in 1989. Doyle ran the company's potash sales through most of the 1990s while Childers expanded the company through a series of acquisitions. After Childers retired, Doyle took over. He bet on increased potash demand by boosting spending on mine expansion in 2003 and 2004. As fertilizer prices surged, Doyle became the "poster child" for the industry's image problems, says Hugh Loomans, CEO of Sylvite Group, a Burlington (Ont.)-based fertilizer distributor. "People in the farming community are still upset about those price increases," says Loomans, who has served with Doyle on the board of the Fertilizer Institute, an industry lobbying group.

Potash for immediate delivery in Vancouver jumped to $650 a metric ton in June 2008, from $190 a year earlier. Prices rose by a similar amount from China to Latin America, angering growers globally. "First the price doubled, and then it tripled," says Brian Willott, who farms soybeans and corn near Palmas in Brazil. "You feel kind of trapped because there's nothing else you can substitute for it." Potash investors hope that continues to be the case.

The bottom line: With global demand for fertilizer booming, PotashCorp has drawn a $40 billion hostile bid. The company says it's not enough.

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