PotashCorp has offered consolation to investors denied the chance of selling out to BHP Billiton by unveiling a share buyback worth up to $2bn, enough to purchase 5% of its shares.

The buyback, set to be completed by the end of the year, follows two days after BHP withdrew its $39bn bid for the Canadian potash giant, after failing to receive consent from Ottawa for the deal.

While BHP's offer was equivalent to $130 a share, this bid was widely seen as an opening gambit likely to be raised to secure investor backing, especially after soaring crop prices sent values of other fertilizer groups higher.

Shares in PotashCorp, which opposed the offer as "grossly" undervaluing the group, topped $153 in New York soon after BHP declared its pursuit in August.

Hedge cutter? 

The buyback was viewed as "not entirely surprising" by analysts at National Bank Financial, given PotashCorp's need, following the collapse of the bid, to "demonstrate underlying value greater than BHP's offer price".

Although PotashCorp shares closed above the $130 level on Tuesday, ending at $134.63, this was the lowest since the bid was announced.

National Bank estimated that the share purchase, which will be funded from existing credit facilities, will leave PotashCorp with net debt equivalent to a still-comfortable 1.4 times earnings before, interest, tax depreciation and amortisation, at the end of the year. The current expectation is 0.8 times.

A London investor told Agrimoney.com that PotashCorp may also be attempting to facilitate the exit activist investors, which often buy into companies involved in takeover situations, to sell out.

"Hedge funds can cause trouble even to a huge company like PotashCorp," the investor said.

"It is probably wise to encourage them to move on."

'Cheap publicity'

Indeed, PotashCorp still faces a bid threat, with Russia-based Phosagro revealing on Tuesday that it would consult with Canada's government on a bid.

Phosagro is chaired by Vladimir Litvinenko, an ally of Russia's prime minister, Vladimir Putin.

Nonetheless, the chances of Phosagro succeeding where BHP failed were rated "slim" by Salman Partners analyst Jaret Anderson, who noted reports that Phosagro was valued at about $7bn-9bn.

"In our experience, companies that are serious about making a bid for another corporate entity don't publicly disclose their intent to the Street and they don't choose a target five times their size," Mr Anderson said.

"PhosAgro may succeed in garnering some cheap publicity, but at this time, we don't see a credible bid for PotashCorp as being in the cards."

PotashCorp shares stood 1.2% higher at $136.21 in midday deals in New York on Wednesday.