What is the potential takeover price of Potash Corp?
Background: BHP Billiton, the world’s largest base metals miner made a hostile offer to acquire Potash Corp of Saskatchwan – the world’s largest potash miner by production capacity for $130/share all cash. The offer represents a 16%-33% premium depending on which reference price you look at (prior day’s close or volume weighted average price over 30/60 days).
Yesterday, POT shares opened at $142.84 on the NYSE or at ~10% premium to the takeover offer.
Many analysts have reassessed their price targets and published the potential takeover price. Here I would like to summarize the various takeover prices with the relevant analysis and links
CIBC World Markets – estimates of potential takeover target price based on Potash Corp valuation using couple methods:
Method 1 – Takeover price as a multiple of Net Asset Value. Target Read more…
Market places 10% premium over takeover price – pricing Potash at $143
This morning, Potash Corp rejected a takover offer of $130 (US) from global miner BHP Billiton citing it as “grossly inadequate” As of close yesterday, Potash was trading at USD 112.15… the takeover offer constitutes a 16% premium over yesterday’s close.
The highest Potash has ever traded – $230.09 in June 2008
52 Week High/Low – 126.98 – 83.75
Potash opened around $143 today which is $13 or 10% more than the takeover offer… I was on the call this morning with Potash and here is what I gather from the discussion:
Board of Directors are:
- open to maximizing shareholder value i.e. open to competing offers
- didn’t comment on expected/target
- expect fertilizer market to grow in 2011
- unware of government position if there was an adequate offer from a competitor. Federal government could potential block acquisition by imposing foreign ownership restrictions similar to Cameco which is the global leader in Uranium
- didn’t comment on a potential reverse takeover of acquirer
I’m waiting for Analyst reaction on what the approriate target should be…
Prior to the takeover offer, here is the target price by a couple investment banks:
- CIBC World Markets had a 12-18 month price target of $105 (as of 16 Aug 2010)
- ScotiaCapital – C$138 (as of 29 Jul 2010)
- UBS – US$120
Question:
What is the intrinsic value or Net Asset Value of Potash Corp and what is fair target price given the current and prospective agriculture environment?