BHP Billiton chief to meet Potash investors in US

BHP hopes to take advantage of fact that half of its North American shareholders are also investors in Potash
Marius Kloppers, the boss of BHP Billiton, will fly to the US for talks with investors who also have shares in Potash. Photograph: Mick Tsikas/REUTERS

Marius Kloppers, the chief executive of BHP Billiton, will fly to America next week for face-to-face talks with investors controlling at least 20% of Potash Corp of Saskatchewan, the mining giant's $39bn (£25bn) acquisition target.

BHP executives will use the trip – part of a planned two-week investor roadshow around the company's annual results – to take advantage of the fact that half of the mining company's North American shareholders are also investors in the Canadian potash producer, which is fighting BHP's hostile bid.

Among the common shareholders in the two companies are Capital World Investors, which owns 7.07% of Potash Corp, Blackrock (3.89%), RBC Asset Management (2.85%), Harris Investment Management (1.66%), Marsico Capital Management (1.21%) and Caisse de Dépôt et Placement de Québec (1.18%). There are many more BHP investors with stakes of just under 1% in the target company.

Kloppers said: "We will find out more [from Potash shareholders] when we go to America. There is 50% shareholder overlap in the US. Information is always a good thing to obtain."

The company subsequently tried to play down the comments and both Kloppers and his aides claimed that they had no idea how much of Potash Corp their own shareholders held. However, joint shareholdings are often viewed as a crucial factor in pushing takeovers over the line, while the complexity involved in BHP Billiton's numerous listings means that the miner's shareholders may speak for a far higher percentage of Potash Corp.

News of the trip came as Kloppers unveiled an increase in full-year profits and promised not to overpay for the acquisition target, a pledge assisted by the apparent lack of rival suitors.

Another potential bidder, Brazil's Vale, counted itself out earlier in the week and Rio Tinto is also cool. However, BHP is still expected to have to increase its offer to secure the company, raising the prospect it might have to seek shareholders' approval. BHP's initial offer was $130 a share but analysts expect it to pay something closer to $150 a share.

BHP's annual results also showed that the company has significant firepower for an all-cash bid, albeit with the numbers marginally below analysts' expectations. In the year to the end of June, the miner generated $17.9bn in cash flow from its operations, helping reduce its debts to $3.3bn. Pre-tax profits of $19.6bn were up from $11.6bn the previous year as commodity prices were pushed higher by the economic recovery in markets such as China. Revenues rose 5.2% to $52.8bn and BHP declared a final dividend of 45 cents a share, up from 41 cents the year before.

In its results statement, the company said: "After a period of rapid recovery in the developing world, economies such as Brazil and India have returned to full output and the focus has now shifted away from supporting growth towards controlling inflation. In China, the government has implemented meaningful measures aimed at controlling rapid economic expansion and asset inflation.

"Fiscal policy has been adjusted with renewed focus on the economy's inevitable transition away from a dependence on investment, towards more balanced, consumption-led growth."

The company added that elsewhere, the significant public spending cuts and higher taxes announced in Europe were yet to be fully implemented, "implying the inevitable negative impact on growth from fiscal consolidation remains ahead".

As a result, BHP Billiton reckons China's GDP will slow towards the more sustainable level of about 8%.

BHP's shares dipped 11.22p to £17.92. Potash Corp's shares were trading down $3 at about $146, which is still 12% above BHP's offer.

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