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Top Ag Plays for Fertilizer M&A Boom

Fertilizer producer Potash Corp. of Saskatchewan (POT - Get Report) on Tuesday rejected an unsolicited $38.6 billion takeover offer from Anglo-Australian mining king BHP Billiton (BHP). BHP's offer came in at around $130 per share, or a 16% premium to the stock's closing price from Monday.

As good as that offer might look to any shareholder who was long the stock prior to the bid, the company made it abundantly clear that the offer was inadequate.

Potash Chairman Dallas J. Howe said in a statement that the BHP offer substantially undervalues the company. "We believe the timing of your proposal is highly opportunistic given that, among other things, the industry is still in the early stages of a recovery," he said.

BHP's move helped to spark a big rally in the fertilizer sector, driving up names like Monsanto (MON - Get Report), Mosaic (MOS - Get Report) and Agrium (AGU - Get Report).

The news got even more exciting today when BHP Billiton decided to bypass Potash's board and take their offer directly to the its shareholders with a hostile bid. BHP is hoping that shareholders will take the money and tender their stock at $130 per share.

BHP is clearly trying to capitalize on a booming uptrend for the fertilizer and agriculture commodity prices. It especially wants to snap up Potash, because like its name, potash is used to improve the quality and yield of crops and it's in very limited supplies. Currently, it is mined in only 12 counties in the world.

An even bigger reason that BHP wants a piece of the ag space is due to the rapidly increasing demand for food that is being driven by population growth. According to the United Nations' Food and Agriculture Organization, global population is set to soar to 9.1 billion by 2050 from its current levels of 6.8 billion.

Here 's a look at a number of stocks that could be great plays on the fertilizer M&A boom.

Investors, who don't want to play the fertilizer sector with just one individual name, should look toward a more diversified way to play the space with ETFs.

The most popular ETF for this sector is the Market Vectors Agribusiness ETF (MOO), which is also the most liquid and heavily traded. This pure play on the ag complex holds positions in some of the best capitalized and most compelling names in the space. Some of the funds top 10 holding include Archer-Daniels-Midland (ADM - Get Report) at 4.6% of assets, Deere & Company (DE - Get Report) at 4.66% and Monsanto (MON - Get Report) at 7.9%.

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ADM $46.46 0.00%
AGU $106.30 0.00%
AGA $27.58 0.00%
BHP $47.10 0.00%
DBA $22.32 0.00%


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