(Bloomberg) Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer, rejected an unsolicited $39 billion takeover proposal from BHP Billiton Ltd. as too low, prompting speculation of a higher bid. Potash Corp. turned down the $130-a-share offer, saying it was “grossly inadequate,” and adopted a so-called shareholder rights plan as a defense. Potash Corp. jumped as high as C$151.08 ($146.18) in Toronto trading and competitors rallied on expectation the industry will consolidate.

A bid had been awaited after potash prices fell from a record last year, prompting speculation that BHP, the world’s largest mining company, may move to acquire Potash Corp. Bill Doyle, chief executive officer of the Canadian company, said in May that BHP would be more likely to buy a potash producer than rely on developing its own supply. BHP CEO Marius Kloppers said last August BHP earmarked “billions of dollars” for its Jansen potash project in Canada, which is near Potash Corp.’s mines.

Potash Corp., based in Saskatoon, Saskatchewan, supplies agricultural and industrial clients with potash, which describes a variety of potassium-bearing minerals used in fertilizers.

Affordable for BHP

“It is a world-class franchise, there’s no question about that,” JPMorgan Chase & Co.’s Ian Henderson, manager of $7 billion in natural-resource assets including BHP shares, said by telephone from London. “It is certainly affordable for BHP. It gives some of the marketing know-how that possibly BHP doesn’t have for its existing potash operations in Canada.”

“We expect BHP to return with a counter bid, however it can afford to take its time since we don’t see any interloper risk,” Liberum Capital Ltd. analysts Michael Rawlinson and Dominic O’Kane said today in a note. “To us the acquisition of Potash can only be done by BHP alone and the only group BHP may find itself competing against is its own shareholders.”

Competitors Intrepid Potash Inc. and Mosaic Co. also advanced, gaining 5.3 percent and 8 percent respectively. Yara International ASA, the largest publicly traded nitrogen- fertilizer maker, jumped 4.2 percent to 250 kroner in Oslo.

Industry Mergers

“What is clear from this is that the potash industry is going to be consolidated by the mining industry,” Paul Cliff, an analyst at Nomura Holdings Inc. in London, said today by phone. “And that may happen a lot quicker than most people thought.” Cliff has a “reduce” rating on BHP stock.

Potash Corp. today announced a shareholder rights plan to prevent any party from accumulating a stake of more than 20 percent without making an offer to all stockholders.

The so-called poison pill anti-takeover defense is intended to ensure that “in the context of a formal take-over bid, the board of directors of Potash Corp. has sufficient time to explore and develop alternatives to enhance shareholder value, including competing transactions that might emerge,” the company said in a statement.

BHP dropped 2.9 percent to 1,905.5 pence in London. The Melbourne-based company confirmed it made an approach and said the board of Potash Corp. “has not agreed to engage in discussions,” according to a statement.

Population Growth

Potash producers are snapping up assets and expanding capacity as food needs grow. The global population will swell to 9.1 billion in 2050 from 6.8 billion, the United Nations’ Food and Agriculture Organization said in September.

Rising demand for potash, especially after the U.S. forecast a decline in wheat output because of adverse weather in Russia, Ukraine and Kazakhstan, is also driving acquisitions elsewhere. Last week OAO PhosAgro, the world’s second-largest maker of phosphate fertilizer, said it’s seeking a merger with Russian potash producer OAO Silvinit. Troika Dialog said Aug. 16 that Silvinit may merge with Russia’s OAO Uralkali.

BHP said in June its Jansen project in Saskatchewan contains about 3.37 billion metric tons of potash. The venture is in the feasibility phase, while two other projects in the same region are at an earlier stage, the company said.
 
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