NEW YORK (TheStreet) -- In some alternate universe, BHP Billiton (BHP) - Get Report never made its bid for Potash (POT) , and the Saskatchewan fertilizer giant's stock is trading at a level independent of all this crop-nutrient-M&A and global-food-supply sturm-und-drang.
One wonders what the value of Potash's shares might be in that alternate universe.
Chris Damas, for one, has wondered aloud about it. An investor and analyst at the research shop BCMI Research, in Ontario, Damas is an acute observer of all things Canadian and mining and investing. Recently, he sent around to his clients and other followers an epistle on this very subject. (Damas also happens to own Potash stock.)
His method for calculating just where Potash would be trading in that BHP-less universe was simple -- and thus fairly persuasive.
All you do is take Potash's peers, tote up the average of their share-price increases for a representative period -- the three months between June 22 and Sept. 22, say -- and apply the resulting percentage to Potash's stock. What you get is an average rise of 47.7% for
, and an alternate-universe, sans-BHP share price for Potash of $143.46.
New York Stock Exchange
trading Friday afternoon, Potash shares were changing hands at $145.50.
You might reasonably ask: Why is any of this important?
As Damas points out, a common rhetorical tactic deployed by the targets of hostile takeover bids is to claim that the prices of their equity would -- even without the unwanted suitor and all the attendant
speculators and arbitrageurs
-- still be as high as (if not higher than) their deal-buoyed stock prices.
And, indeed, Potash has repeatedly claimed the same thing, attempting to argue at every opportunity (including its
) that the recent run-up in worldwide corn and grain prices would have boosted its stock price without all this BHP takeover nonsense.
Damas' little though experiment, then, is a way to fact-check this piece of target-company rhetoric.
Not only that, it's also a way to perhaps gauge how high BHP will take its offer next, should it decide to raise at all -- or, for that matter, how high a white knight might bid, if Potash can succeed in stitching something viable together out of the flotsam of potential investors cited in the press. (Most recently,
is by far the most-talked-about
potential white knight
Lastly, if none of the above occur, if BHP steps aside and a white knight remains in the armory, Potash shareholders wouldn't necessarily get the shaft. As Damas says, he would "expect only a short-term drop in the stock price."
-- Written by Scott Eden in New York
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