Ontario Teachers Pension Plan to Bid for PotashCorp., Threatening Rival Bids

PotashCorp. has attracted heightened interest from rivals trying to top BHP Billiton's takeover offer.

(October 11, 2010) — BHP Billiton’s $39 billion bid for PotashCorp is likely threatened by rival plans, with reported bids by Sinochem of China and the Ontario Teachers Pension Plan (OTTP). PotashCorp. has rejected BHP’s bid as too cheap, and said it expects other investors to enter the bidding scene.

The Canadian pension fund that owns national lottery operator, Camelot, is attempting to impede BHP Billiton’s £24 billion takeover bid for the world’s biggest fertilizer producer. The OTTP has reportedly approached Temasek, Singapore’s state investment agency, as part of a search for consortium partners that could bid for all or part of PotashCorp. The offer for the Canadian fertilizer producer will be possibly with Canadian miner Teck Resources, the British newspaper The Sunday Times said. Under the plan, PotashCorp. would sell its nitrogen and phosphorous assets, pay out a $70 a share dividend, and increase its debt pile, the newspaper reported without citing its sources. The OTTP, Temasak and Teck are considering both a full-on takeover bid as well as buying a minority stake in Potash meant to halt BHP Billiton’s pursuit.

Separately, Sinochem, the Chinese state-owned chemicals and fertilizers company, has reportedly approached Temasek as well after they approached the Indian state-owned iron ore miner, NMDC, about making a joint bid. Yet, Sinochem has appeared to be struggling to build an effective counterbid, The Financial Times reported. NMDC’s chair quickly denied this, telling Reuters that “there is no such proposal.”

In an interview with The Globe and Mail last week, PotashCorp. chief executive officer Bill Doyle said in an interview that another bid is coming, and the company is talking to a wide-range of potential bidders, citing sovereign funds, private equity and Canadian pension funds as possibilities. He requested more time to let the bid process pan out, indicating that his backup plan will not be revealed until closer to BHP’s bid expiration deadline of November 18.

Want the latest institutional investment industry
news and insights? Sign up for CIO newsletters.

The activity around PotashCorp of Canada, which sits on roughly 40% of the world’s supply and is by far the most politically stable supplier, illustrates that the fertilizer industry is ripe for takeovers as a new frontier of investing, contributing to a race by pension funds to get their hands on the supply.



To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

Pensions Brainwashed by 'Twitter Effect,' Leading Investor Says

In response to a call by Britain's former City minister Lord Myners for major shareholders to look to the longer term, a leading fund manager condemned Twitter for contributing to a society keen on instant results without regard to what will happen years into the future.

(October 10, 2010) — The head of the National Association of Pension Funds (NAPF) has blamed the ‘Twitter effect’ for hurting pension schemes, and amid growing pension deficits at some of Britain’s biggest companies, he fears that short-term mindset to measure investments will become more and more apparent.

Lindsay Tomlinson, the chairman of the NAPF, said the “Twitter effect” has significantly contributed to the pension industry’s propensity to make short-term investment decisions, The Guardian is reporting. “As a pension fund investor, how do you make a 50-year investment decision using something like Twitter? I don’t know; I think it is an issue for us; and I think society is going to have to start to think about this issue a lot harder. It affects everything, not just pension investment,” Tomlinson told the NAPF’s annual conference in Liverpool.

Tomlinson, a fund manager who is also a director of the Financial Reporting Council and chairman of the Takeover Panel’s code committee, said pensions are increasingly driven to respond to modern society’s demands for instant gratification, a culture illustrated by the nature of short, 140-character long tweets that crowd the social messaging site.

He added that rule changes over the last three decades — spurred by demand for trading profits, mark-to-market accounting reforms, and regulations that call for reporting of short-term gains and losses — has encouraged pensions to ignore long-term consequences, according to The Guardian. Three issues he highlighted driving the short-term debate: 1) The industry’s nature of being overloaded by trivial information, 2) investment agents seeking to satisfy the interests of investors while looking to increase confidence, and finally 3) the propensity for investors to be “slaves” to the economy and markets.

For more stories like this, sign up for the CIO Alert newsletter.

Pension fund deficits are increasingly plaguing pensions in the UK, reflected by the growing demands put on the Pension Protection Fund (PPF), which backstops failed corporate pensions, as experts have warned that the fund is being overstretched and may soon have to reduce the amount it pays out. A recent study by KPMG showed that 32% of FTSE 100 firms are struggling to fill gaps in their pension deficits from current discretionary cash flow, with pension deficits of FTSE 100 companies jumping by £15 billion this year to £65 billion.



To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

«