CORRECTED – DEALTALK-Fast money pours into Potash but influence limited

(Corrects figure in second bullet point and fourth paragraph
to 10 percent from 20 percent)

* Hedge funds, arbs could have limited effect in deal

* Under 10 pct of Potash shrs changed hands by Tues-source

* Arbs hold mid-single digit percent of Potash shrs-source

By Michael Erman

NEW YORK, Aug 25 (BestGrowthStock) – Fast money is building in
Potash Corp (POT.N: ) (POT.TO: ) after BHP Billiton Ltd’s (BHP.AX: )
(BLT.L: ) $39 billion hostile bid, but the sheer size of the
potential deal could limit the sway arbitrageurs and hedge
funds have on the outcome.

More than 145 million Potash shares have been traded since
the Canadian fertilizer company said last week that BHP had
made a $130-per-share buyout offer, according to Reuters data.

While that is equivalent to 50 percent of Potash Corp’s
outstanding shares, the number also includes shares that have
changed hands more than once.

According to a source familiar with the matter, less than
10 percent of Potash Corp’s shares is estimated to be held by
new shareholders, such as arbitrage investors, since the
company made BHP’s offer public on Aug. 17.

Arbs like to speculate on companies in play because they
focus on short-term payouts rather than waiting for longer-term
prospects to bear fruit. Thus, they might be willing to sell at
a lower price than long-term shareholders.

Arbs, speaking on the condition of anonymity, said fast
money is picking up large positions in Potash, but there are
limits on how much influence they can accumulate given the
company’s large market cap, currently at about $44 billion.

“It’s a big company — this isn’t Airgas (ARG.N: ),” said one
arb, referring to the chemical company currently trying to fend
off a hostile bid by rival Air Products (APD.N: ). Arbs have been
following that potential transaction closely.

Even if one were to assume 10 percent ownership of Potash
by arbitrageurs and hedge funds, that would require more than
$4 billion of purchases by the investors.

The same level of activity would buy more than two-thirds
of Airgas, which currently has a market capitalization of less
than $6 billion.

According to the source familiar with the situation, the
arbitrage ownership of Potash Corp is likely to be in the
mid-single digit percentage levels.

$40 BILLION QUESTION

BHP Chief Executive Officer Marius Kloppers on Wednesday
played up the influence of arbs and hedge funds on Potash,
saying “quick money makes the decisions at the end of the
day.”

“A huge chunk of this register has changed hands in the
last week — I think over 40 percent of the register,” Kloppers
said in a CNBC interview. “Clearly there are a lot of
arbitrageurs in there. There are a lot of hedge funds and so
on.”

Computerized high-frequency trading has inflated volumes in
recent years, and fast money like arbitrageurs and hedge funds
can trade in and out of stocks targeted in a hostile bid.

While the ability to turn a quick profit might spur some
arbitrage investors to sell at a lower price than some
long-term investors, any arb that bought into the stock after
the BHP offer became public would have paid more than $130.

Potash shares have risen about 30 percent since the world’s
largest fertilizer maker disclosed BHP’s bid on Aug. 17. The
stock fell 2.4 percent to $145.50 on Wednesday on the New York
Stock Exchange.

Hedge funds and arbitrageurs are sophisticated investors and
are not necessarily all looking for the same outcome.

“The idea that hedge funds are some giant monolith that all
move together is a very dangerous way to look at the world,”
said one investor, who believes that shareholders will hold out
for significantly more money than is currently on the table.

“There are fast money (investors) who bought at $140 and
will sell at $150, but that’s not everybody… The guys who buy
the largest positions are the guys who are least likely to
think like that,” he said, suggesting they are likely to hold
out for more money.

A Reuters poll showed Potash investors think BHP could
succeed with a higher bid of $162 a share, while many analysts
regard $157 as a winning offer. [ID:nLDE67J0PV]

Click on [ID:nN22340110] for more stories on the takeover.
(Reporting by Michael Erman; editing by Carol Bishopric)

CORRECTED – DEALTALK-Fast money pours into Potash but influence limited