Shares of Potash Corp. were down Thursday after Canada blocked BHP Billiton's bid to buy the company, and it appears unlikely that the government, focused on protecting national assets, will change its mind.
In a surprise decision by a government that has historically favored foreign investment, Canada has rejected a foreign takeover bid for Saskatchewan-based Potash Corp. Australian mining company BHP Billiton had offered $38.6 billion in what would have been the world's largest corporate acquisition this year.
After a couple of fairly sleepy years, mergers and acquisition activity has bounced back dramatically, with potential long-term consequences for the stock market. It's a rare ray of hope at a time when other economic indicators are pointing straight toward the floor.
When BHP Billiton made its offer to acquire Potash Corp., two residents of Madrid, Spain, made $1.1 million by buying out-of-the-money call options ahead of the announcement, the Securities and Exchange Commission claims. The SEC is suing the investors, and has frozen $1.1 million of their assets.
After rejecting a $38 billion offer from BHP Billiton, Potash Corp. is now very much in play. Investors have good reason to think that the stock price could be headed much higher in the coming weeks.
Potash Corp. of Saskatchewan Inc. said Monday that its board voted unanimously to reject BHP Billiton's hostile $38.5 billion takeover offer as it doesn't reflect the strong growth the company believes it is poised to enjoy.
Fears of an economic slowdown have sent stocks reeling and bonds soaring. With companies sitting on record piles of cash and easy credit available, this may lay the foundation for a potential mergers and acquisitions boom -- and help revive equities.
