BHP going hostile on £25bn bid for Potash

BHP Billiton, the world's biggest miner, has launched a hostile $39 billion (£25bn) bid for Canadian fertiliser group Potash, after its initial approach was rejected earlier this week.

The Anglo-Australian mining firm yesterday announced it would make its $130-a-share offer directly to shareholders, bypassing Potash's board which a day earlier called the bid "grossly inadequate".

But investors and analysts expect BHP will have to raise its offer - the biggest takeover bid of the year so far - after shares in Potash jumped a record 27 per cent to $143 a share on Tuesday, 10 per cent above the bid price. BHP said it was offering a 20 per cent premium to the closing price on 11 August - the day before BHP's first approach to Potash directors.

Tom Elliott, managing director of Melbourne hedge fund MM&E Capital, said: "Everyone's saying they'll have to pay more."

BHP, sitting on an estimated $11bn cash pile, is looking to capitalise on a resurgence of the global fertiliser industry. It plans to become the world's largest fertiliser supplier.

BHP chief executive Marius Kloppers said yesterday: "(This deal] further diversifies our footprint by customer, by geography and by commodity, We are driven by a belief that potash mining has good long term industry fundamentals."

Potash is the common name for various compounds containing potassium, which are used mainly as fertilisers. BHP has long been interested in expanding into potash for its next spurt of growth, but investors had expected it to focus on growing its own assets, including the Jansen potash deposit in Canada.

BHP said it expected a deal to add to earnings in the second full fiscal year after completion and had arranged financing. It put total funds required for the deal at $43bn, including options and pension obligations.

Shares in BHP fell around 3.4 per cent, closing at 1,850p.