(B)(N) POT Potash Corporation of Saskatchewan Incorporated

In August 2010, just two years ago, BBL BHP Billiton PLC (an Australian company with headquarters in Melbourne, Australia and London, England) made a $40 billion “hostile” takeover bid for all of POT Potash Corporation.

The offer paid Potash shareholders about $50 per share for their stock then trading at $37 but the deal was discouraged by the Canadian Government oversight under The Investment Canada Act (1985) which requires that Ottawa review and potentially block any “foreign investment” worth $300 million or more if the government finds that it doesn’t provide “net benefits” to Canadians. One doesn’t really know what $300 million (or, currently, $330 million) buys these days but that’s certainly a lot of oversight and, regardless, the exemptions appear to allow the effective control or acquisition of a company through “debt” such as secured loans or preferred shares which could render the common stock worthless, in which case $300 million is more than enough to “buy” anything.

Since then, Potash has raised its dividend by 50% to $0.84 per share ($720 million per year) and re-purchased about 15 million of its own shares (about 5% of the public float) at a cost of $2 billion but the current stock price has waned and is around $40 as it was two years ago.  We sold the last of our Potash stock at $55 in July 2011 under our usual (B)(N)-rules. Please see Exhibit 1 below.

About 30% of the world potash production originates in Saskatchewan and BHP Billiton has not been reticent in stepping up to the plate, so to speak, with the acquisition of Athabasca Potash Incorporated in May 2010 and its proposed $12 billion development of the Jansen mine. However, we also sold the last of our BHP Billiton stock at $80 last year and it too is trading in the $60-$70 range at the present time (please see Exhibit 2 below) despite the dividend rate of US$2.28 per share or over US$6 billion per year that is paid to the shareholders worldwide.

Exhibit 1: (B)(N) POT Potash Corporation of Saskatchewan Incorporated – Price Chart

The Potash Corporation of Saskatchewan Inc is an integrated fertilizer and related industrial and feed products company.

(Please Click on the Chart to make it larger if required.)

As usual, we only buy or hold the stock of a company if the stock price plausibly exceeds the Risk Price (SF) (Black Line in the Chart) and our buying or “selling” prices are shown as the Stock Price (SP) (Red Line) and reflect the “buying” and “selling” disciplines that we enforce. (Please see our Post, The Wall Street Put, August 2012.) Both the Stock Price (SP) and the Risk Price (SF) are step-functions and the Risk Price (SF) is only re-calculated as new balance sheet data become generally available to investors. Please see our Post, The Price of Risk, August 2012, for more information on the meaning of the risk price but it can be loosely described as “the least stock price at which a company is “likeable” ” (Goetze 2009) and “likeability” has to do with investor confidence that a stock is likely to retain its value and, hopefully, a positive return above the rate of inflation.

Exhibit 2: (B)(N) BBL BHP Billiton PLC ADS – Price Chart

BHP Billiton PLC is engaged in minerals exploration, development, production & processing, and oil & gas exploration, development and production.

(Please Click on the Chart to make it larger if required.)

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Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”.

Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability.

We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now.

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