Corrected: Fast money pours into Potash but influence limited

Thu Aug 26, 2010 11:55am EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

Corrects figure in second bullet point and fourth paragraph to 10 percent from 20 percent

By Michael Erman

NEW YORK (Reuters) - Fast money is building in Potash Corp after BHP Billiton Ltd's $39 billion hostile bid, but the sheer size of the potential deal could limit the sway arbitrageurs and hedge funds have on the outcome.

More than 145 million Potash shares have been traded since the Canadian fertilizer company said last week that BHP had made a $130-per-share buyout offer, according to Reuters data.

While that is equivalent to 50 percent of Potash Corp's outstanding shares, the number also includes shares that have changed hands more than once.

According to a source familiar with the matter, less than 10 percent of Potash Corp's shares is estimated to be held by new shareholders, such as arbitrage investors, since the company made BHP's offer public on August 17.

Arbs like to speculate on companies in play because they focus on short-term payouts rather than waiting for longer-term prospects to bear fruit. Thus, they might be willing to sell at a lower price than long-term shareholders.

Arbs, speaking on the condition of anonymity, said fast money is picking up large positions in Potash, but there are limits on how much influence they can accumulate given the company's large market cap, currently at about $44 billion.

"It's a big company -- this isn't Airgas," said one arb, referring to the chemical company currently trying to fend off a hostile bid by rival Air Products. Arbs have been following that potential transaction closely.   Continued...