A train car waits in line at Potash Corp.'s Cory mine near Saskatoon.DAVID STOBBE/Reuters
Three small shareholders of Potash Corp. of Saskatchewan Inc. have launched a class-action lawsuit against the fertilizer maker, accusing the company of disregarding their interests in rejecting BHP Billiton Ltd.'s $39-billion (U.S.) hostile bid.
The shareholders, who own just 100 Potash Corp. shares in total, allege that the company's board abused its position by refusing to consider BHP's $130-a-share offer and by adopting a poison pill without seeking shareholder approval.
The three shareholders, Richard Painter, Susan Painter and Herbert Francl, allege that Potash's Corp.'s board violated U.S. Federal Securities laws and the Canada Business Corporations Act, in a lawsuit filed in a U.S. District Court in Chicago, on Wednesday.
"The directors of the company have served their own interests before those of Potash shareholders and acted oppressively and in a manner that unfairly prejudices and disregards the interests of shareholders," said the plaintiffs in their compliant.
However, legal experts doubt that the action at this stage poses a serious threat to Potash Corp., or its board.
"I have never seen a class action brought by shareholders, and not [a lawsuit]by the rival bidder, have any effect on the outcome of a control contest," said John Coffee, a professor at Columbia Law School in New York.
BHP launched its bid for Potash Corp. in August. The world's top fertilizer producer flatly rejected the bid as inadequate and has stated that it has been talking with other interested parties. So far no rival bid has emerged.