January 28, 2010 / 2:58 PM / in 8 years

UPDATE 2-BHP to acquire Athabasca Potash for C$341 mln

* BHP to pay C$8.35 per Athabasca share in cash

* Deal to expand BHP’s potash asset base in Saskatchewan (Adds details, background. Figures in U.S. dollars unless noted.)

TORONTO, Jan 28 (Reuters) - Global mining giant BHP Billiton (BHP.AX) (BLT.L) said on Thursday it has agreed to acquire Canadian potash explorer Athabasca Potash API.TO for C$341 million ($323 million) in cash, expanding its asset base in the potash-rich Canadian province of Saskatchewan.

The bid further illustrates BHP’s commitment to the sector. It bought Anglo Potash in 2008 and plans to invest $240 million in 2010 to develop its Jansen potash project in the province. [ID:nN20132301]

BHP said it agreed to pay C$8.35 per share in cash for Athabasca, a 25 percent premium to Athabasca’s closing price of C$6.70 on Wednesday. Athabasca shares jumped to C$8.29 in heavy trading soon after the Toronto market opened, up C$1.59.

The global fertilizer sector has been rife with mergers and rumors about deals as stock prices tumbled during the global economic downturn. Brazilian mining giant Vale VALE5.SA said on Wednesday it would pay $3.8 billion to buy Bunge Ltd’s (BG.N) fertilizer assets in Brazil. [ID:nN27166536]

BHP has been linked with many of the rumors — the Anglo-Australian miner has repeatedly expressed an interest in becoming a major player within the potash industry.

Crop nutrient potash emerged from obscurity a few years ago when high grain prices, tight potash supplies and strong demand drove prices above $1,000 a tonne from below $150.

Prices have since retreated to about $350 to $400 a tonne as farmers, hit by the credit crisis and falling grain prices, reined in their use of the nutrient.

But many analysts expect potash demand to bounce back this year as farmers scramble to replenish soil nutrient levels.

Potash Corp POT.TO, the sector’s largest player, dimmed those hopes on Thursday with a forecast the fell well below analyst expectations. [ID:nN28196679]

Athabasca’s Burr project in Saskatchewan is adjacent to BHP’s own Jansen project, the junior potash player also owns a number of exploration properties in the vicinity.

“This acquisition fits well with our existing projects and land positions in the Saskatchewan potash basin,” said Graham Kerr, BHP’s president of diamonds and specialty products.

Athabasca said its board has approved the proposed deal and major shareholders have entered into lock-up agreements, promising shares that account for about 40 percent of Athabasca’s outstanding common stock in favor of the deal. ($1=1.06 Canadian dollars) (Reporting by Euan Rocha in Toronto; Additional reporting by Eric Onstad in London; editing by Janet Guttsman)

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