Potash vs. BHP: The Fertilizer War, From A to Z

NEW YORK (TheStreet) -- BHP Billiton's BHP hostile pursuit of Potash Corp. POT has as many moving parts as a cuckoo clock. There are other clichés available for use. The BHP-Potash drama will likely have as many chapters as a Russian novel. Or as many twisting roads and hidden mews as the street plan of Inner London. In other words, it's tough to keep it all straight. Thus, we've compiled a handy slideshow primer -- a manual, a Cliff's Notes, an A-to-Z guidebook -- that breaks down and explains all the elements (people, places, issues, obstacles) that will play a role in determining this story's ultimate ending. It's a story, by the way, that also has a Big Theme and a lot at stake: ownership of some of the best sources of a most profitable crop nutrient and, therefore, a highly lucrative hold on the nourishment of the world's billions. It's perhaps appropriate that we've settled on the road-atlas metaphor. After all, BHP Billiton CEO Marius Kloppers has arrived in New York for a roadshow this week. Officially, he and his top aides are simply conducting their regularly scheduled post-earnings meetings with the company's biggest North America-based institutional investors. But it doesn't take much imagination to read between the lines. There's a large degree of overlap between the shareholder bases of both BHP and a certain fertilizer producer out of Saskatchewan -- both companies being mineral extractors on a global scale. With BHP having taken its hostile offer directly to shareholders nearly two weeks ago, it's hardly presumptuous to think that a certain $130-per-share offer will come up for discussion. Nor would it be outrageous to believe that, perhaps -- delicately, subtly -- BHP executives will be attempting to ascertain just what price will convince those big Potash shareholders to sell. Publicly, BHP is holding fast at $130. Almost no one believes that such an offer will get a deal done, barring some unforeseen event, though sentiment may have swung a bit lately. Potash shares rocketed as high as $150.20 in the days immediately after BHP's pursuit came to light. They have since retraced some of those gains. The stock was trading on the New York Stock Exchange Wednesday afternoon at $147, down 25 cents, on lighter-than-usual volumes. BHP has said it cannot fathom what other honest-to-goodness bidder could emerge from the rabble as a white-knight rival. Others, however, can -- namely Potash itself, despite the fact that the world's other two humongous mining multinationals, Vale VALE and Rio Tinto RTP, have publicly taken themselves out of the running. With BHP and Potash locked in what almost assuredly will become a prolonged mating dance, here's our compilation of the most important variables governing the outcome. Arbitrage After BHP's quest for Potash came to light on Aug. 17, it looked at first as though the arbs had poured en masse into Potash stock. (Merger arbitrage is when investors attempt to wring a profit on the spread between the stock price of a takeover target just after the news breaks and its price when an eventual deal closes.) On the surface, it looked like a ripe opportunity for this genre of short-term trader. But that conventional wisdom has come in for revision. For the most part, the arbs have stayed away from this potent fertilizer-deal stock. The Financial Times reported recently that the amount of Potash shares held by arbs is abnormally thin for an acquisition target -- a percentage in the "mid-single digits," the newspaper said. To read the rest, head over to TheStreet.com