The chief executive of PotashCorp stands to make at least $370m (€288.7m) if BHP Billiton succeeds in taking over the company for $130 a share and possibly more, if market expectations of a higher bid, possibly from China, prove accurate.
Bill Doyle, chief executive since 1999, has amassed ordinary shares and options that are worth $372m at BHP Billiton’s opening bid, according to a calculation by the Financial Times.
Mr Doyle owns 2.9m options exercisable at strike prices from about $10 to about $60 a share. He also owns nearly 470,000 ordinary shares, according to the company’s latest regulatory filling in February.
Company policy states that in the event of change of control “all outstanding non-exercisable options granted to the executive become exercisable”, implying that he would receive a lump sum immediately. In addition, Mr Doyle stands to receive three years of salary and the average of the last three years’ bonuses.
Without a change in ownership, Mr Doyle’s stock options are exercisable in allotments that run from November this year until May 2017. Mr Doyle said earlier this week that he was not opposed to a sale of PotashCorp, but rather he objected to a “steal of the company”.
He said that the company was worth significantly more than BHP’s offer. Analysts said that the price would need to rise above $160 a share before shareholders entertained an offer from the Anglo-Australian miner.
PotashCorp said the vast majority of executive compensation was “tied directly to their ability to generate long-term value for the company’s shareholders”. The company added: “Anyone who has been a long-term shareholder of PotashCorp has benefited from tremendous value creation.”
Mr Doyle has typically waited as long as possible before exercising his stock options, people close to the company pointed out. They added that Mr Doyle’s accumulation of shares should help align his interests with those of other shareholders in seeking full value in any potential deal.
Mr Doyle could easily receive $500m in cash if BHP raises its opening $130 a share offer, because of shareholders’ demands if rival interest emerges.
PotashCorp is expecting rival interest from China that could disrupt BHP Billiton’s hostile bid. The world’s biggest fertiliser producer is counting on Beijing’s interest in securing reliable supplies of fertiliser as well as preserving the potash market’s pricing structure.
Shares of PotashCorp in New York rose for the third day in a row on Thursday, reaching $154.86, up 2.05 per cent on the day, well above the Anglo-Australian miner’s offer of $130 per share.
But without signs yet of a counterbidder to maintain upward pressure on the share price, people close to PotashCorp suggested a Chinese consortium as a strong rival to BHP. People close to the company said it was pursuing concrete strategies to increase shareholder value, repeatedly pointing towards China as a potential dealmaker.
While a Chinese counter-offer was one possibility, analysts said a stronger possibility was a joint venture or a strategic investment. Another possibility is that China, either through state-owned banks or through Beijing’s sovereign wealth fund, China Investment Corporation, could provide finance to a deal.
In 2008 Rio Tinto welcomed Aluminum Corp of China , the state-owned Chinese miner, onto its shareholder register partly in a blocking manoeuvre against BHP, whose bid for Rio collapsed with the onset of the financial crisis.
PotashCorp has strong links with China, the world’s biggest fertiliser importer. The Canadian company owns a 22 per cent stake on Sinofert, China’s biggest fertiliser maker and distributor. PotashCorp is a leading member of Canpotex, a cartel system that Chinese buyers favour because it ensure reliable annual prices.
Sinochem, the Chinese state-control giant chemical company, is also a shareholder into Sinofert, controlling 53 per cent of the company.
Additional reporting by Helen Thomas in New York