Hello. Welcome to Company Focus. My name is Aamer Nawid, Research Analyst at Fat Prophets.

Today I'm going to be taking a look at the latest goings on at BHP Billiton's proposed takeover offer of Canada's fertiliser giant Potash Corporation.

For many investors, Potash Corp, well they'll not be as familiar with Potash Corp as they would do for companies obviously listed here in the UK. Given that BHP is prepared to pay $39bn for them, or $130 per share, it's a good time to have a look at what they actually do, particularly as their business seems to be quite some way away from what BHP Billiton would consider its core business sort of mining and metals.

Potash Corp, what they actually do in terms of their business, is they are the world's largest fertiliser company by capacity and they produce three key crop nutrients - potash, phosphate and nitrogen.

As the graphic here shows, the company is focused on, and as the company's name suggest, potash - a crop nutrient which basically guards crops against insects, droughts and diseases. The Group have the capability to produce around about 30m tonnes of the stuff; about 20 per cent of global capacity.

BHP's thinking is quite straightforward. Growing global population, more mouths on the planet to feed coupled with growing urbanisation and therefore, less arable land upon which to grow food on should see a surge in demand for potash, the commodity. The focus of this particular demand will be in the East where these dynamics are most at play.

BHP has made significant strides in developing its own potash project, the Jansen project in Canada. However, it all looks good. Eight million tonnes is the potential capacity there, but sales won't begin until 2015. Going after Potash Corporation, the company gets a foothold into the market now and the fertiliser industry is one which is on the bounce having peaked in the commodities boom and subsequently fallen quite significantly.

The chart for Potash Corp since 2006 tells the story. Shares have been as high as $240. That was basically fuelled by the price of potash, the commodity, going up to beyond $1,000 per tonne. Since the global financial crisis, the price of potash has come down and taken the share price of Potash Corporation with it and it has also left BHP spying an opportunity.

So the offer has been rejected, so what's next? Well it's going to be compelling viewing the next few weeks. The offer has gone hostile. BHP is going to have to go their shareholders directly and convince them that they're not being ripped off in terms of the offer. They're also going to have to work on sidestepping a shareholder rights plan which was basically put in place as a poison pill, I suppose to make it more expensive and more difficult for BHP to gain control.

The key dynamic here is going to be the emergence of rival bidders. The poison pill is essentially a delaying tactic and management of Potash are probably quite aware that they need to delay things in order to get rival bidders through to try and get more money for shareholders.

Looking out there, there's not many companies which can actually table such a bid. $40bn isn't exactly pocket change. Brazil's Vale potentially, or maybe a Chinese concern could add a bit of spice and maybe come into the fray. But other than that, it's going to be quite tough for others to raise the funds.

However, looking at the recent share price action, it's gone above the offer price and clearly, the market believes that the price will have to increase for the deal to get done.

The offer comes straight after another good 12 months for BHP share price wise and production wise. Share price has sort of galvanised and done well. Production, the company produced record production levels for nickel, for alumina, for coal. Their iron ore operations in Brazil performed very, very well and they've set records in terms of their petroleum division as well.

So BHP is a standalone entity in its current form is continuing to do very, very well.

From where I see things, Potash will basically form another line in terms of the BHP future production reports which will be very earnings accretive and will be beneficial to shareholders in the long-term, even if the recent share price action has exhibited a bit of price weakness.

I think maybe investors are a bit nervous about overpaying. Maybe they're thinking about the Rio Tinto Alcon situation a while back. There is also the Australian election in the next few days. That's going to obviously have implications for the resources tax.

But I think overall from where I can see things, BHP itself continues to represent a very, very robust play on the emerging developing world in Asia as well as a recovery, the recovering economies in the West.

Thanks for watching. Make sure you tune in again next week.