Overflowing potash demand is catalyst in BHP hostile takeover bid

It appears like there is going to be a push for more potash in agriculture. Potassium is one of the primary things potash is which helps with agriculture quite a bit. Fertilizer uses only potash as its source of potassium. The world desperately needs potash to make food. Because there is no futures market for potash, other minerals have outperformed it in a recent commodities market boom. However, a huge increase in demand for potash is within the forecast. This has inspired the hostile takeover of a Canadian potash company by an Australian minerals business.

Potash urges shareholders to resist BHP tender

Potash Corporation of Saskatchewan, known as Potash, has control over a big chunk of the world’s potash market. The Canadian fertilizer company should be concerned about a business in Australia. The big minerals extraction business in Australia, or BHP Billiton, is trying to get their hands on the company. As outlined by the New York Times, $ 130 a share was what BHP was willing to pay for the company. The Potash board rejected the offer as too low. A tender offer is getting used by BHP for a hostile takeover of Potash. This means shareholders get to see the cash directly in front of them. Potash is trying to get a better offer from one more while getting shareholders to stop selling to BHP.

Potash is crucial to the world’s food supply

Potash is produced in 12 countries. More than 75 percent of global supply comes from Canada, Russia, Belarus and Germany. As outlined by Reuters, fertilizers need potash. Potash is really just what you call anything that is potassium. Potash strengthens a plant’s resistance to disease, improves crop quality and boosts yields. It is important to get potassium in fertilizer. Potash is the only source for that. Potash hasn’t been very stable in price. The prices are volatile for years. Ten years ago it sold for under $ 150 a ton. Within the global food crisis of 2007-08, it went up to $ 1,000 a ton. Since then, it has crashed to about $ 350-$ 375 a ton.

Potash from Saskatchewan probably the most wanted

Until BHP has made all these moves, Potash hasn’t really been anything everyone cared about. According to Entrepreneur, by 2011, there won’t be enough supply of potash if the growth continues as it has in the last five years. There are numerous countries wanting more meat making it so potash is more needed. Examples of these countries are Latin America, China and India. Another factor is exploding growth in biofuels like ethanol, which the UN said could meet 25 percent of the worlds energy needs within the next 20 years. Wheat and corn prices have gone up through this already. Now seems like that potash demand has to go up as well. It is not all that easy to make more potash available. More than 85 percent of the world’s potash mines are more than 25 years old. It seems difficult to produce more potash. The Saskatchewan business experiences this problem.

Additional reading

New York Times

dealbook.blogs.nytimes.com/2010/08/20/bhp-begins-tender-offer-for-potash/?src=busln

Reuters

reuters.com/article/idUSTRE67J2SQ20100820

Entrepreneur

entrepreneur.com/tradejournals/article/166229304.html