Opportunistic BHP Goes Hostile Against POT; BHP: Try $260

BHP has gone hostile in its $40B takeover offer for Potash Corp. The offer was flatly, and correctly, rejected by POT's board yesterday. BHP is simply being opportunistic taking advantage of a depressed stock market.

BHP is offering $130 in cash for each Potash Corp. share, which PO says is “grossly inadequate.”, again correctly.

However, POT rose to $143.17 in New York, perhaps BHP should consider raising its offer to $260?

What BHP is neglecting in this story is that POT is a Canadian success story and Canadians will not give it away that cheaply, specially a red hot company with a product in huge demand.

BHP's Downgrade

Moody’s Investors Service said today before BHP’s statement that it was monitoring the initial offer and would likely place the company’s rating under review for possible downgrade in the event of a formal bid.

The cost of protecting BHP’s bonds from default rose the most in about 21 months. CDSs on BHP jumped 30 basis points to 101 basis points, the biggest increase since Nov. 20, 2008.

Potash Corp. called the timing of BHP’s bid “highly opportunistic and an ill-disguised attempt to exploit an anomaly in the equity market valuation.” POT adopted a so-called shareholder rights.

Time for straddles.