Potash prices are crucial to how far BHP Billiton can stretch its $39 billion hostile bid for Canada’s Potash Corporation of Saskatchewan. The miner’s offer is essentially a bet on demand for the commodity, which accounts for the bulk of the fertiliser giant’s value.
According to calculations by Reuters Breakingviews, every $50 increase in the long-term price of a tonne of potash adds about $20 to Potash Corp’s value. BHP’s offer reflects the current market. But if prices rocket, so too will the value of its target.
– The author is a Reuters Breakingviews columnist. The opinions expressed are her own –
By Una Galani
LONDON (Reuters Breakingviews) – Investors are being squeezed in Vedanta’s deal to buy a controlling stake in Cairn India. The miner controlled by ambitious Indian billionaire Anil Agarwal will spend as much as $9.6 billion — more than Vedanta’s own market capitalisation — to purchase up to 60 percent of the Indian oil producer. Yet the London-listed miner’s complicated leap into the oil industry serves mainly as a reminder of the risks faced by minority investors in public companies.
Reliance Communications is facing up to reality in its attempts to deleverage. The mooted sale of a 26 percent stake in India’s second largest telecom operator could raise almost $2 billion and halve net debt. But with current market valuations a long way from their peak, it must have been painful for Reliance’s board to give the green light for a strategic investor to come in.
The group is the only one of the top Indian operators without a foreign partner experienced in rolling out next generation networks. It was also the late to India’s telecoms boom, and racked up debts trying to catch up. In May, Reliance agreed to pay $1.8 billion for third generation licences in an auction where prices exceeded analysts’ highest expectations. Meanwhile, fierce competition has driven down Reliance’s EBITDA margin by over four percentage points to 35 percent in the last year. Fitch estimates Reliance’s net debt to rise from 2.5 times EBITDA last year to 3.9 times by the end of 2010.
Bharti Airtel may be about to realize its dream of becoming an emerging market telecom giant. India’s largest cellphone operator has made a $10.7 billion non-binding offer to buy most of Kuwaiti rival Zain’s African assets. The deal would add 40 percent to Bharti’s current enterprise value.
The potential transaction appears to have the support of Zain’s board. Bharti’s challenge, however, will be convincing its own investors that the African adventure is worthwhile. They wiped 9.2 percent off the company’s shares on Monday following the announcement that the two companies were in talks.
Nokia is mapping out its defense in the battle for smartphone supremacy. The Finnish handset maker will offer free turn-by-turn voice guided navigation services on all of its smartphones. The goal is to boost sales of its high-end devices by leveraging the expensive 2008 acquisition of digital mapping firm Navteq. The move is bold, but has a hint of desperation. Nokia wants to stop rivals such as Google and Apple from stealing more of its market share.
It’s easy to see why Nokia is frustrated. Smartphones — internet enabled mobile devices — now account for 15 percent of global mobile phone shipments. That share is expected to rise to 45 percent by 2013. Yet Nokia’s slice of this premium market fell from 44 to 35 percent between the second and third quarters of 2009, according to research firm Canalys.
Dubai’s reputation has ended the year in tatters, but there’s no need to wave Dubai-bye quite yet. Abu Dhabi, the capital of the United Arab Emirates and the source of rescue loans for its neighbor, has good reasons to keep Dubai on life-support.
The bailout has already been costly for Abu Dhabi. Over the course of 2009, institutions based there have committed $25 billion to Dubai in subordinated loans which yield only 4 percent. Of course, Abu Dhabi, which has a sovereign wealth fund widely thought to be worth $600 billion, can easily find the money.
MADRID (Reuters) – Excavations in southern Spain have failed to find the remains of Spanish poet Frederico Garcia Lorca, whose 1936 killing became a symbol of a brutal civil war, a forensic report said on Friday.
Digging got under way last month on the rocky hillside believed for decades to have been an unmarked grave, and the failure casts doubt on whether Garcia Lorca’s body will ever be found.
MADRID (Reuters) – The Catalan parliament took the first step on Friday toward what would be the first ban on bullfighting in a region of Spain, calling for an end to the traditional spectacle by 67 to 59 in an initial vote.
The initiative to ban bullfighting, to which many Spaniards are passionately devoted but which animal rights activists consider cruel, will now go to a final vote in March or April.
Vivendi has nine months to show investors its worth. The French conglomerate might not see any of the $5.8 billion it is making from the sale of its 20 percent stake in NBC Universal until September next year. Given its poor track record in creating shareholder value, Vivendi should use the time to convince investors that it deserves to keep the cash.
Investors have reason to doubt Vivendi’s ability to generate superior returns. Since chief executive Jean-Bernard Levy took charge in 2005 the French group has delivered a total return of just 1 percent on its portfolio which includes the world’s largest music group, a French pay-TV platform, controlling stakes in two mobile phone operators and a computer games maker. Over the same period, the Dow Jones European Telecoms and Media indexes have returned 3 percent and 29 percent respectively.