Potash Corp. 's hissy fit is a little curious. Blue chip companies usually react to hostile overtures with more discretion and decorum. Potash's board, by contrast, wants everyone to know it's offended as hell and not going to take it any more. Until, that is, BHP sweetens its bid.
All theatrics aside, this board is signalling that it's worried but also prepared to sell. It just doesn't want to sell for $130 (U.S.) a share.
The board gives plenty of good reasons why that's a "steal" of a price, to quote CEO Bill Doyle. But it doesn't mention another reason, which I guarantee will play a big role in this melodrama: greed - and I used that word in its most neutral sense, with no value judgment attached.
You think you're excited about yesterday's 25 per cent pop in your Potash shares? That's swell. But what's more swell is being Mr. Doyle. He made more than $100-million yesterday. His Potash-related holdings are now worth more than $350-million. (If you think this math doesn't add up, you don't understand the beautiful leverage of stock options.)
In the interest of full disclosure, allow me to say that I am intensely envious, jealous and covetous of Mr. Doyle's wealth. It's a lot of money, and I would like it. Champagne baths for all my friends.
But is it enough? Besides being based on a lowball bid, it's just so far off what Mr. Doyle's hoard could be worth. At, say, $160, his options are worth more than $400-million. At about $250, the all-time high for Potash stock, they're worth almost $700-million. Throw in the CEO's stock and pension and it's north of that.
If I were CEO, I would of course try to keep a level head about me. But I'd be thinking about how many hundreds of millions I might be worth. So would you. And so must Mr. Doyle, who at 59 has accomplished a lot and is old enough to retire but young enough to enjoy life, including charitable works. The only goal of making that much money is to give it away, after all.
The point is, Mr. Doyle was once worth more than $700-million - and of course he'd like to be worth that again. Who wouldn't? If you've ever played cards for money, you know the strange agony of cashing out for $400 when you were up $1,000 earlier. It's painful. Or think about your own stock portfolio. Do you ever dream of your stocks going back up to where they once were? Sure you do. This isn't different.
You are right if you're thinking that the board will decide what offer to take to a shareholder vote, not Mr. Doyle alone. But their actions say they're interested in a sale at the right price. According to the company's circular, the 11 other directors have "value at risk" of $40-million in stock. They didn't do as well as Mr. Doyle yesterday, but they didn't do badly either. And let's be honest: CEOs who serve on boards tend to have a lot of influence over their peers, even if, as in this case, they don't serve as chairman.
So, while the analysts and experts will talk about the metrics of this deal, the multiples, the ratios, the premiums and or discounts, the outcome will be defined as much or more by the balance sheet of human nature.
Thanks to BHP's bid, $130 is the floor price. Thanks, in part, to Mr. Doyle's option hoard, any sale price will be a lot higher than that. This is good news for shareholders, as long as he doesn't get too greedy and hold out for an offer so over the top that it never arrives.
And there is nothing like a takeover bid to raise awareness of the company.