The Successful Investor Hotline – Friday, August 27, 2010

Article Excerpt

POTASH CORP. OF SASKATCHEWAN, $154.99, Toronto symbol POT, continues to trade above the $130.00 U.S.-a-share hostile takeover offer from BHP Billiton Ltd. (New York symbol BHP). BHP is a recommendation of our Wall Street Stock Forecaster newsletter. Based on today’s exchange rate, Potash Corp. shares trade at 13.2% more than BHP’s offer. That suggests investors expect a higher bid. However, because of Potash’s $45.5-billion market cap (or the value of all of its outstanding shares), there are only a handful other companies that could afford to buy it. As well, the federal government would probably block an offer from a company controlled by a sovereign wealth fund. (Sovereign wealth funds are state-owned investment funds that are usually financed by an economic surplus. For example, China Investment Corp. is China’s sovereign wealth fund.) Moreover, BHP has little room to raise its offer. That’s because BHP’s shares also trade on the London Stock Exchange, which would require BHP to hold a special shareholders’ vote…

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