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Game Changing Event in Fertilizer/Agriculture Valuations

|Includes:AGU, BBL, BHP, CF, IPI, MON, MOO, MOS, MT, PKX, Potash Corporation of Saskatchewan Inc. (POT), RIO, VALE

 

Potash & Ag Merger Offer Changes Sector Valuation Models (POT, BHP, MON, MOS, AGU, CF, IPI, MOO)

Posted: August 17, 2010 at 7:47 am



Agriculture and potash investors had one small deal to consider yesterday, but today investors have the mother load to consider.  Potash Corp. of Saskatchewan (NYSE: POT) has rejected an unsolicited $130 per share acquisition from BHP Billiton plc (NYSE: BHP).

To make matters even more interesting, Potash Corp. also went defensive by adopting a shareholder rights plan that has a 20% trigger.  The company claims that the terms of the merger grossly undervalue the company.

Potash shares are trading significantly higher this morning.  Versus a $112.15 close on Monday and versus a 52-week trading range of $83.75 to $128.42, shares are trading up as high as $142.00 on over 400,000 shares with some two hours until the open.

If the price of this offer is not a game changing event for the agriculture, potash, and fertilizer sector, then nothing else is.

Monsanto Corp. (NYSE: MON) closed at $57.70 and shares are trading up over $60.00 pre-market versus a 52-week range of $44.61 to $87.06.

Mosaic Co. (NYSE: MOS) closed at $51.13 and shares are trading up over $56.00 pre-market versus a 52-week range of $37.68 to $68.28.

Agrium Inc. (NYSE: AGU) closed at $65.87 and shares are trading up over $70.00 pre-market versus a 52-week range of $45.16 – 73.85

CF Industries Holdings, Inc. (NYSE: CF) closed at $84.59 and shares are trading up over $90.00 pre-market versus a 52-week range of $57.56 to $110.00.

Intrepid Potash, Inc. (NYSE: IPI) closed at $23.96 and shares are trading up over $26.00 pre-market versus a 52-week range of $19.08 to $34.20.

Market Vectors Agribusiness ETF (NYSE: MOO) is on the move as well.  The ETF closed at $42.39 and are indicated for trading around $45.50 versus a 52-week range of $35.56 to $47.90.

Potash players may have a mixed business outlook on their own.  With this valuing Potash Corp. at north of $38 billion, valuation models for the sector just changed.

JON C. OGG

Stocks: POT, MOS, BHP, BBL, VALE, RIO, PKX, MT, MON, AGU, CF, IPI, MOO