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Potash Goes Higher as BHP Goes Hostile

Potash Corp. shares reached another 52-week high Wednesday as BHP Billiton takes its bid directly to holders of Saskatchewan's favorite company.
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(Potash-BHP story updated with further commentary and for closing stock prices.)



) --

Potash Corp. of Saskatchewan


shares notched another 52-week high Wednesday after

BHP Billiton

(BHP) - Get Free Report

took its offer directly to shareholders of the Canadian fertilizer giant, transforming its bid into a

hostile buyout attempt


Investors clearly continue to believe that

BHP will increase its offer for Potash

well above the initial $130 a share all-cash price (which values Potash at about $39 billion).

In another session of hectic trading, Potash's stock finished Wednesday at $147.93, up 3.3% from the previous close. Volume surpassed 25 million shares, compared with the name's three-month average daily turnover of 5.6 million.

On Tuesday, Potash announced that its board had rejected an unsolicited offer made by BHP last week.

>>BHP-Potash Deal Seen as Inevitable

In a letter to Potash shareholders and in a press release, BHP urged investors to take the deal, arguing that its offer price gives Potash holders "immediate liquidity and certainty of value regarding the company's growth potential in the face of volatile equity markets."

The company also called its offer "fully funded." According to


, a group of six banks will underwrite a syndicated $45 billion loan for BHP should it and Potash strike a buyout deal.

Many are predicting that BHP will inevitably sweeten. Charles Neivert, a stock analyst at Dahlman Rose in New York who covers agriculture and chemical shares, predicts that BHP will eventually push its offer price above $150 a share.

Others are bolder. Analysts at




have targets of more than $170. Hari Sambasvia of the Canada's

National Bank Financial

believes $180 is possible.

The relative lack of actively producing potash mines around the world, combined with BHP's stated to desire to enter this profitable business, means the Australians will likely be willing to pay a premium for Potash Corp., these analysts say.

BHP-Potash Poll

Will BHP Win Potash? Vote in our poll here

"We do not anticipate other bidders to enter the fray but expect a higher bid down the road," Dahlman Rose's Neivert wrote in a note to clients Wednesday morning. "While we anticipate management to remain hesitant, we believe changes in the shareholder base subsequent to this announcement to result in further dialogue with BHP."

Don't expect any quick resolution to the proceedings, analysts say. The backroom negotiations and the public posturings will likely play out over months. But most observers feel a deal will eventually get done.

BHP's American depositary receipts again traded lower Wednesday, falling 2.9% to $68.15. The ADRs lost 2.4% on Tuesday.

Among other fertilizer names -- a sector that has caught a case of consolidation fever --


(MOS) - Get Free Report

stock again advanced sharply as investors made bets on the probability of the biggest U.S. based fertilizer maker coming into play. The company is majority owned by the giant privately held agriculture conglomerate


, from which it was spun off in 2004. Deal rumors have in the past linked Mosaic and Brazilian miner


(VALE) - Get Free Report


Mosaic shares rose another 4% Wednesday to $57.88 on volume of 16 million shares, triple the daily average turnover.

-- Written by Scott Eden in New York


>>Will BHP Win Potash?

>>BHP-Potash Deal Seen as Inevitable

>>Agrium Enters Aussie Fertilizer War

>>After Big Gains, Whither Agriculture Stocks?

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Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.