Sunday, August 22, 2010

Taking Care of Business, Everyday; Taking Care of Business, Everyway

Here’s another one of my attempts to re-interpret the business section for the masses.

The biggest news this week on Bay Street and whatever the main street in Saskatoon is (apparently its 1st Street), is the proposal from Australian mining consortium, BHP Billiton Ltd, to takeover Saskatchewan’s largest corporation (and the 8th largest Canadian company by market cap): Potash Corp.

So what did the good folks at Potash Corp do concerned that their company was being undervalued by thieves from down under? The executives at Potash instituted a poison pill in order to stall a takeover.

So I know what most of you are thinking way back in the 1980’s Michael Douglas made that movie about Wall Street (I think it was called Wall Street) and the term poison pill was bandied about so frequently you sort of thought septuagenarian Douglas was actually talking about past due Viagra but were too naïve to ask what a poison pill really means… (that’s EXACTLY what you’re thinking right, to a tee?)

To answer said question: Uncle Jono what is a poison pill?

Well if you’re George Smitherman in the 80’s (haay) a poison pill was a party cocktail that probably loosened inhibitions and allowed you to partay into the early morning.

But if you’re in the business world a poison pill is a shareholder reaction to hostile takeovers which attempt to protect current shareholders from having to accept a hostile takeover. In Potash’s case what Potash executives did was amend their ownership structure, so that if any shareholder takes a 20% stake in the company (ie the Russel Crow of the mining world BHP) existing shareholders would get the right to buy a lot more shares at a discounted price, making a takeover prohibitively expensive from BHP’s perspective as suddenly they’re competing with shareholders who can buy shares in the company at a lower price.

But like, that’s all pretty confusing for the lay-person, so let’s break this shit down.

Imagine you’re in grade nine and you’ve just been assigned a group assignment: you and your three besties are to pick one country and do a complete economic, social and political overview of it. You and your posse of girls (let’s call them the Mean Girls) have totally decided that they’re going to work together and everyone is like totally psyched, OMG, about it. Unfortunately, your teacher, Mrs. Fitzhenry, is all like… ya know that weird girl who transferred here from Australia? The girl with the weird accent? Apparently she really wants to join your group and like the thing is… you know that that the weird girl isn’t just going to join your team. She’s totally going to take over your team. It’s not really a merger people. It’s a takeover. She will takeover and suddenly instead of divvying up the work between her house and your house all the work will be done at her house and instead of you doing cool research, she’ll be doing all the cool research, because you know she’s the type of girl who walks around with tonnes of toonies in her pocket and she thinks she knows what is what. When she doesn’t know what is what. Ya know?

So what do you do? You undervalue your own group and tell your teacher that you’ve already completed the assignment.

Poison Pill = Mean Girling.


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