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Potash Corporation of Saskatchewan Inc. (POT-N) says it has been in discussions with 15 potential bidders for the company as it works to trump BHP Billiton Ltd.'s (BHP-N) $38.6-billion US hostile bid, but needs more time for a possible counteroffer to come forward given the size, complexity and funding required to do the transaction, new regulatory documents filed Friday show.
The "highly charged political environment" around approving such a bid is also a factor weighing on timing of talks, PotashCorp says.
In a submission before the Saskatchewan Financial Services Commission, PotashCorp said the length of time needed for the interested parties to make an offer is "further compounded" by the global economic climate "and the reality that financing is less readily available than it has been in the past."
Saskatoon-based PotashCorp also argues the "nature and location" of its assets require interested parties to conduct "substantive and time consuming due diligence before formulating views on valuation and structuring alternative proposals."
The submission is being made ahead of a Nov. 8 hearing scheduled in Regina for the provincial regulatory body to consider a challenge BHP has launched to quash a so-called poison-pill PotashCorp adopted. Also known as a shareholder rights plan, poison pill is an option extended to existing shareholders that allows them to buy more shares at bargain-basement prices. The aim is to make any takeover prohibitively expensive.
PotashCorp adopted a shareholder rights plan on Aug. 16 after making BHP's takeover attempt public, to allow it more time to explore and develop alternatives to the bid. PotashCorp has maintained other bids are coming to trump BHP's offer. So far, no other offers have been put forward.
In a submission filed with the Saskatchewan regulator, BHP said the rights plan should be rejected because there is "no reasonable likelihood" that other bidders will emerge beyond its Nov. 18 offer deadline. PotashCorp said it has "engaged in discussions with 15 strategic, financial and state-sponsored potential bidders or investors," and they need more time to evaluate the company. He said the parties have been given access to the company's confidential information and that due diligence is ongoing "to assist them in determining whether and at what price they may be interested in pursuing an alternative transaction with PotashCorp."
"Discussions and negotiations are continuing with possible strategic buyers and/or investors regarding the possibility of pursuing an alternative transaction through investors pursuant to the terms of confidentially agreements," the regulatory documents state.
On Thursday, PotashCorp used a 62-percent surge in third-quarter profits as ammunition to reject BHP's $130-per-share offer as too low.
While PotashCorp chief executive officer Bill Doyle continues to talk up possibilities of a counterbid, time is running out for a serious contender to come forward.
The challenge for possible rivals is not just finding enough funding to trump BHP's bid, but to get the necessary approval from the federal government.
As The Globe and Mail reported Thursday, there's mounting skepticism in Ottawa over BHP's offer in the days leading up to Investment Canada's decision, which is expected as early as next week.
PotashCorp also cites the government hurdles in its regulatory submission, saying "in some cases, potential bidder and investors ... require positive preliminary signals from the Canadian government and regulators that they would be open to considering a bid or investment."
"As illustrated by recent developments, the highly charged political environment and the uncertainty regarding whether Investment Canada Act approval will be granted has had and continues to have a significant impact on the time and speed at which negotiations with foreign entities are progressing," the court documents.
The company argues that approval "adds significantly" to the time needed to "properly canvas strategic alternatives for the purpose of enhancing shareholder value."
The federal government's concerns about BHP's bid come as Saskatchewan politicians campaign against Ottawa allowing the sale of a key strategic resource in the province to a foreign buyer.
That position makes it less attractive for a foreign buyer with enough financial backing to step forward, leaving PotashCorp with perhaps few choices but to remain a standalone company.
In an interview Thursday, Doyle said that was a possibility.
"We are very optimistic about our chances as a standalone company, but if another bid comes by that our shareholders feel is compelling and that is the choice, then that's the way it is," Doyle told The Globe and Mail.
Asked where the other bids are that he has insisted for weeks are coming, Doyle responded, "Be patient. Let's see what comes at the end of the day."
"We have an ongoing and active process," he added. "All options are on the table. The only one we won't screw around with is one that destroys shareholder value."