BHP & Mosaic BHP deal hopes amid tepid moves for FTSE
By Bryce Elder
August 5, 2013 6:21 pm
BHP Billiton was a talking point in a lacklustre London market amid deal speculation.
Merrill Lynch said BHP should make an opportunistic bid for Mosaic, North America’s second-largest potash producer.
Buying Mosaic for about $20bn made more sense than BHP’s plan to bring its own Jansen potash project into production at a potential cost of up to $15bn, the broker argued.
Having had a $39bn bid for Canada’s PotashCorp blocked in 2010, BHP remains committed to building a world-scale potash business, Merrill said.
Mosaic, it said, “could provide instant critical scale via a large-scale, low-cost, long-life asset”.
Mosaic, long rumoured to be a takeover target, dropped more than 20 per cent to hit a three-year low last week after a potash cartel collapsed.
But the collapse was unlikely to have affected BHP’s investment strategy, which has been framed on a 20-year-plus view, Merrill said.
Its analysts reckoned Mosaic and Jansen would provide similar production for a similar price, though the former also included a phosphate business that was worth as much as $8bn.
Buying Mosaic at a 20 per cent premium would boost BHP’s earnings by 12 per cent in the first year before tax savings, Merrill calculated.
A deal for the US-headquartered group would not have to be approved by the Canadian government and could be funded easily from BHP’s balance sheet, which could support more than $50bn of debt, it said.
BHP ended up 0.4 per cent to £19.02, slightly outperforming a tepid wider market. The FTSE 100 ended 0.4 per cent lower, losing 28.29 points to 6,619.58.
https://www.ft.com/cms/s/0/2f2cd178-fdf0-11e2-a5b1-00144feabdc0.html#axzz2b9TVArRL