Monday, Bank of America Merrill Lynch said BHP Billiton Ltd., the world's largest mining company, could increase earnings by purchasing Saskatchewan based Potash Corp. of Saskatchewan Inc. according to media reports. Bank of America Merrill Lynch believes BHP Billiton Ltd. could further its earnings and cut excess cash with the acquisition of Potash Corp. at a 30% premium on its share.
Analysts believe the acquisition of Potash Corp. would be a logical step for BHP and a fine addition to its portfolio, with the market possibly receptive to such a move. Reports also suggested that the offer could add about 13% to BHP earnings in the first and second years after the deal.
For BHP, it would be more cost effective to buy a rival than spending billions of dollars to develop its own potash mines. Potash Corp. currently has a market capitalization of US$30.8 billion.
Melbourne based BHP, however is yet to comment on any potential deal.
BHP chief executive officer Marius Kloppers in August had indicated that his company would spend billions to develop its Jansen potash project in Canada, which is near Potash Corp.'s mines. Reports indicate Potash Corp., which is the largest fertilizer maker by capacity, to be idling about half of its capacity in mining the crop nutrient and laying off as many as 700 workers.
Agricultural chemicals makers have issued profit warnings, and potash prices are below BofA Merrill's long-term price estimate in years. While Potash Corporation's shares gained 13% this year through October 16, BHP's shares gained 42% for the year.
Media reports also said that this potential acquisition could start a trend where early-stage Canadian potash companies may have room to extend their healthy rally by being taken over by established miners or emerging market players faced with severe resource crunch back home.
Future deals could involve other possible buyers including some from emerging economies like India and China, who are looking to sidestep the market dominance currently enjoyed by a small clutch of major potash producers. One of the largest fertilizer buyer, China is faced with a resource crunch in energy and is also short on the fertilizer front back home. China is making a serious effort to get a foothold on to Canada's potash areas with state-owned Chinese companies already in Canada to develop a potash base for itself.
Indian companies could also be in the fray, with its largest fertilizer distributor, IFFCO looking to set up potash joint ventures overseas. Two other Indian companies, MMTC and Rashtriya Chemicals & Fertilizers have also engaged in talks with Athabasca Potash, another Saskatchewan based potash producer.
POT is currently trading on the New York Stock Exchange at $103.26, up 6.00%.
BHP is currently trading on the New York Stock Exchange at $73.63, up 2.82%.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.