September 8, 2010 | In: Uncategorized

POT: Others Are Interested Too!

I have written earlier about the hostile bid that BHP made to acquire Potash of Saskatchewan. BHP back then offered $130/share to buy the company, the bid was rejected, and POT soared to $143 (from $112). POT then was growing moderately nearly every week (closing at around $149 yesterday), until yesterday evening, when Bill Doyle announced that there may (or may not be) other parties interested in buying the company (of course, Bill Doyle may or may not be lying, the guy seems opportunistic anyway, and maybe trying to artificially inflate the stock price for his own benefit). POT went up $4.43 in the after hours. I expect POT to close at around $158 today (34 X EPS, which is now high).

POT’s market cap is now $44 billion (with a potential to of going up to $50 billion), big enough to attract the attention of the Canadian government (or any government, for that matter), that may or may not approve the sale, especially as multi-national companies (notably Chinese) are apparently seeking to buy Potash.

This is a very dangerous play for Doyle. He is relying on the immediate clearance of the sale by the Canadian government (wrong), thinking that he has all the time in the world to sell his company, and probably hoping for more catastrophes hitting crops all over the world as well as an exponential increase in food demand, leading to an exponential demand for fertilizers.

POT is becoming a really dangerous stock now, especially since it’s in a highly regulated country such as Canada, and since the sale may cause a huge debate at the public level.

I still think though that the stock can easily go up to $165, in a week or two. Still, nobody knows if Doyle is bluffing with BHP at the moment, who may or may not increase their bid, at the expense of their own stock. POT is becoming bigger to swallow by the day, even for company such as BHP. BHP’s market cap is just over 4 times that of POT’s. BHP’s stock closed yesterday at $69.72 (down a buck from the previous trading day), and is currently down another 70 cents in the pre-market.

Personally I would stay away from both stocks, unless it’s for a short (very short, I’m talking hours) trade.

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