Wednesday, August 18, 2010


Potash Corp. (POT.N),USD143.17 Hold Price Target USD150.00 - David Begleiter: Tgt $110 to $150 to reflect a minimum acquisition price following BHP's $130 takeover proposal for the company. With BHP's bid following last week's news of the likely merger of the two largest Russian potash producers, the consolidation of the global potash industry is underway. While we would not rule out a purchase price for PotashCorp as high as $175 owing to the uniqueness of the asset (world's largest, lowest cost producer), we believe the intrinsic (DCF)) value of PotashCrop, is ~$150. Maintain Hold - BHP Billiton bids $130/share, or $42B (including debt), for PotashCorp. On Tuesday, August 17, PotashCorp announced it had rejected an unsolicited $130/share takeover proposal from BHP Billiton (Buy, 1916p), a 16% premium to the prior day’s close. At $130/share, PotashCorp’s enterprise value is $42B ($38.5B equity, $3.5B of debt). On a multiple basis, BHP is offering to pay 18.6x '11E EPS and 12.6x ‘11E EBITDA. In response, PotashCorp has adopted a shareholder rights plan.

Trading Focus 1008_18 SA

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