Potash (POT) Higher On Deal Speculation

October 19, 2009 12:31 PM EDT

Potash Corp. (NYSE: POT) is up 5.5% to $102.79 at midday. A Bank of America Merrill Lynch report
states that BHP Billiton (NYSE: BHP) should bid for shares of Potash.

BHP is looking to get companies that it would be able to develop, market, and operate on familiar terms. Potash is an area where BHP is familiar, having several attractive dig sites in Saskatchewan already. Note that BHP had acquired Anglo Potash for CDN$263 million mid-2008.

Bank of America thinks that an all-cash bid at 30% a premium could be 13% EPS accretive in years 1 and 2, and the industry is receptive to BHP acquiring Potash assets.

Speculation of a potential deal in the sector have shares of other fertilizer companies up today: The Mosaic Co. (NYSE: MOS) is up 3.63%, Agrium (NYSE: AGU) is up 6.2%, and Potash One (TSE: KCL) is up 4.6%, Interpid Potash (NYSE: IPI) +4%. Rumors of a big takeover in the sector have been rampant and could lead to further M&A.

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