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Potash Corp. CEO Bill Doyle


A surge in profit is giving Potash Corp. of Saskatchewan Inc. more ammunition to reject BHP Billiton Ltd.'s hostile takeover bid as too cheap, and helping the fertilizer giant build a case for going it alone in the absence of another offer.

While Potash Corp. chief executive Bill Doyle continues to talk up possibilities of a counter bid, 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 $38.6-billion (U.S.) bid, but the uphill battle the Australian miner faces to get necessary approval from the federal government.

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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.

Analysts say threats the BHP bid will fail caused Potash Corp. shares to fall more than 3 per cent Thursday, despite its reporting a 62 per cent jump in profit and raising its guidance for this year and next. Still, some hedge fund managers said the impact on the stock would be short-lived, given positive global demand for potash.

The federal government's concerns 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 foreign buyer with enough financial backing to step forward, leaving Potash Corp. with few choices but to remain a standalone company.

It's an option the Saskatoon-based miner has been promoting ahead of BHP's bid expiration date of Nov. 18. Mr. Doyle has also wrapped Potash Corp. in the Canadian flag as part of his opposition to BHP's offer, a strategy that has the potential to backfire should a more attractive offer came forward from another foreign bidder.

On Thursday, Mr. Doyle left the door open for the possibility of another offer late in the game, but he appeared more guarded than in the past.

"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," Mr. Doyle said in an interview Thursday.

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Asked where the other bids are that he has insisted for weeks are coming, Mr. 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."

Since BHP presented its $130 a share offer in August, Potash Corp. has rejected it as undervalued, in particular as demand for fertilizer rises amid concerns of a global food shortage.

In a call with analysts, Mr. Doyle predicted "enormous growth" in potash demand in coming years from countries such as China, India and Brazil.

"Potash Corp. is going to take a disproportionate share of that growth and that's why our earnings will grow faster than any other company," he said.

Potash Corp. also believes BHP's bid is holding back its stock, compared to its industry peers. Mr. Doyle said without the bid, the stock would be valued today at about $155 per share.

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While Potash Corp.'s stock fell Thursday on fears that BHP's bid may not receive government approval, some hedge fund managers said the impact on the stock would not be long-term, given the positive global market outlook for potash.

"We don't have much to lose here," said one New York-based manager. "If BHP's bid fails the stock may go down, but it will come back, and even higher. There is very little risk in potash stock."

In Ottawa on Thursday, Prime Minister Stephen Harper insisted the government is still reviewing BHP's bid and will base its decision on the merits of the transaction, not on political considerations.

"Let me assure you that when we announce this decision, the criteria will be clear and the decision will be taken in the best long-term interests of the Canadian economy," Mr. Harper told the House of Commons.

New Democratic Party Leader Jack Layton said the government's investment review is a "tragic joke that makes Canada a sitting duck for any of these multinational operators to come in because they know a sucker when they see one."



On Thursday, Potash Corp. reported third-quarter earnings of $402.7-million (U.S.), or $1.32 per share in the quarter, compared to $247.9-million or 82 cents per share for the same period last year, when fertilizer prices were depressed as a result of a pullback from the global economic downturn.

Sales for the combined potash, phosphate and nitrogen businesses totalled $1.57-billion for the quarter ended Sept. 30, up from $1.1-billion last year.

The results beat expectation of a profit of $1.16 per share and revenues of $1.3-billion, according to estimates from 20 analysts surveyed by Thomson Reuters.

Potash Corp. also said it expects 2010 net income to be in the range of $5.75 to $6 per share, up 15 per cent from a previous forecast of $5 to $5.50. It also increased its global potash demand forecast to between 55 million tonnes and 60 million tonnes in 2011, up from 55 million tonnes, and forecast 2011 earnings in the range of $8 to $8.75 per share.

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