UPDATE 1-Potash Corp rejects BHP Billiton's $130/share offer

* Says unsolicited offer 'grossly inadequate'

* Board adopts shareholder rights plan

* Sets trigger at 20 pct



Aug 17 (Reuters) - Potash Corp of Saskatchewan said its board rejected BHP Billiton's unsolicited $130 per share cash offer, terming it as 'grossly inadequate,' and adopted a shareholder rights plan.

Global mining giant BHP Billiton's proposal to acquire Potash Corp substantially undervalues the company, Potash Corp Chairman Dallas Howe said in a statement.

It is not in the best interests of Potash Corp shareholders to enter into discussions with BHP Billiton, the world's largest producer of potash said.

Potash Corp, which set the trigger at 20 percent, said under the rights plan, the board authorized the issuance of one share purchase right in respect of each common share of Potash Corp outstanding as of the close of business on Aug. 16.

The rights plan is intended to ensure that in the event of a formal takeover bid, the Potash Corp board has sufficient time to explore and develop alternatives to enhance shareholder value, the company said in a separate release.

In June, BHP Billiton said it sees potash as an ideal fit within its portfolio of commodity products and is focused on developing its potash projects in Western Canada into a world-class basin play.

(Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Aradhana Aravindan) Keywords: POTASHCORP/ ([e-mail]; within U.S. [phone]; outside U.S. [phone]; Reuters Messaging: [e-mail]) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.