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Morgan:News:BZ |Business| Rejection of C$38.5 billion offer by Aussies for Potash Corp hikes Canadian dollar by speculators

A combination of a rejected C$38.5 billion offer for Canada's Potash Corporation, much-better-than-expected US industrial output figures for July and improved Canadian manufacturing sales figures for June hiked the value of the Canadian dollar nearly a penny against the US today.

PotashCorp (NYSE: POT), one of Canada's biggest exporters, said its Board of Directors "unanimously rejected" the unsolicited US$130/share bid from Australia's BHP Billiton Limited (ASX: BHP; LSE: BLT; NYSE: BHP), saying the bid, 16% over the August 16 closing price of its shares, was "grossly inadequate." Trading today pushed the company's stock up almost 28% to C$143.17 during regular trading, although it started to slip slightly in after-hours trading.

BHP had made the offer quietly, but PotashCorp Chairman Dallas J. Howe said in a prepared statement today, "After careful consideration, and in the interest of transparency, our Board determined to proactively disclose BHP Billiton's unsolicited, non-binding proposal to our shareholders. 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. The fertilizer 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."

The company also released the rejection letter from Howe to BHP chairman Jacques Nasser in Melbourne, which noted, "PotashCorp is significantly and disproportionately undervalued as a result of our strategic decisions to match production with demand while continuing to invest in our infrastructure."

The bid news prompted currency speculators to hope for a bidding war in which Canadian shareholders would be paid out in Canadian dollars if a deal was reached. Research shows that any take-over bid or merger involving a Canadian company, valued above US$2.5 billion, gives a positive push to Canada's currency for up to five days following the news. As a dealer note from Canadian Forex puts it, "This is only the beginning of the bidding process and should support CAD for the time being."

Morgan:News BorderZones * Article Number: 1111 * Checkpoint Premium Service
Published on Tuesday, August 17, 2010

Exchange rates at 1:15 PM Pacific:

 C$1 buys US$1.012270 *  C$100 buys US$101.23
US$1 buys  C$0.987875 * US$100 buys C$98.79

Peter Morgan * Editor * Morgan|News|Border Zones
Editorial tips, ideas, events: * (+1) 604.683.3241 • Skype: MorganNews

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