BHP sweetener may be inhibited by UK regulations

Tue Aug 24, 2010 2:27pm EDT
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By Eric Onstad and Michael Erman

LONDON/NEW YORK (Reuters) - BHP Billiton's hostile $39 billion bid for fertilizer group Potash Corp faces a potential obstacle -- formal approval by its own shareholders -- if it sweetens its offer by more than 22 percent.

That threshold based on UK listing requirements is likely to come into any BHP deliberations on how much to sweeten its bid for Potash Corp, the world's biggest fertilizer company.

"Clearly it's easier for the company not to have go through that whole process, BHP would want to do things as quickly as possible," said analyst Charles Kernot at Evolution Securities in London.

Under the UK listing rules, no shareholder vote is needed at the current $130 per share offer since the total takeover price does not equal to more than 25 percent of BHP's total market capitalization.

The market value is based on the share price the day before the world's top miner BHP unveiled its offer, totaling about $188 billion.

The requirement would kick in if BHP increased its bid to about $158.50 per share or $47 billion, according to Reuters calculations.

A Reuters poll showed Potash investors think BHP could succeed with a higher bid of $162 a share, while many analysts regard $157 as a winning offer.

"Putting yourself in the Never Never Land of a shareholder vote? That's M&A 101 -- don't do it," said an investment banker not working on the deal.   Continued...