China Approached Canadian Fund on Rival Potash Bid
September 2, 2010, 11:20 pm ET
MELBOURNE/TORONTO (Reuters) - Chinese and other investors have approached at least one big Canadian pension manager about a bid for Canada's Potash Corp to rival BHP Billiton's $39 billion hostile offer.
The disclosure by Alberta Investment Management Corp, which manages some C$70 billion ($67 billion) in public sector pension funds, is one of the first pieces of hard evidence to back up speculation that China is looking for a way to derail a takeover of Potash Corp by the powerful Anglo-Australian miner.
AIMCo said it was not interested, because the economics did not work.
China's state-owned chemicals giant Sinochem has reportedly hired HSBC to evaluate options, and chatter persists that sovereign wealth funds, such as China's $300 billion China Investment Corp, may also be seeking a bid of some kind.
Given the size of the deal, all major investment banks not working with BHP or Potash Corp are pitching possibilities to Chinese clients, multiple investment banking sources in Asia have told Reuters.
But so far, no formal counter bid has emerged, only talk. The hefty price tag is still prohibitive for many potential suitors, bankers say.
Shares in Potash closed up 1.8 percent at $148.55 on Thursday, 14 percent above BHP's $130 offer price, while BHP shares edged up 0.3 percent on Friday.
The possibility of Chinese involvement in a valuable Canadian resource has raised concerns in Saskatchewan, which is worried that a takeover of its largest company by a foreign firm or major customer could affect jobs and government revenue.
BT Financial Group portfolio manager Tim Barker in Sydney said the interest in Potash Corp from China, as it seeks to secure the future supplies of fertiliser it needs to rapidly boost food production, potentially changed the dynamics of the deal.
"Eventually it is an interesting line to draw between an independent company important to a province, and allowing it to go to either a customer with a different set of objectives or let it go to a bigger independent company. It will test a few nerves," Barker said.
Saskatchewan Energy Minister Bill Boyd has raised concerns about China buying into Potash Corp and about BHP's stated intent to eventually market its potash offshore on its own, rather than through the export consortium Canpotex.
The state said it had asked the Conference Board, a nonprofit research organization, to examine the effect of a takeover, including the conditions Saskatchewan might ask the federal government to impose on a deal and ways to mitigate risks from BHP's bid and any others that could come forward.
For its part, BHP had been eyeing a major acquisition in the oil and gas sector over the past year, but was unlikely to move on its ambitions while it is tied up with its bid for Potash Corp, a source said on Friday.
BHP, flush with cash since abandoning a roughly $140 billion takeover of rival Rio Tinto in 2008, has been on the hunt for deals to cement its position as the world's largest diversified miner.
It considered, then abandoned, a joint offer with Royal Dutch Shell last year for Australian oil and gas firm Woodside Petroleum worth some A$35 billion ($31.9 billion), the Australian newspaper reported on Friday.
BHP did not return calls seeking comment on the newspaper report, which also cited an unnamed global energy industry figure as saying the mining giant may also be interested in Anadarko Petroleum Corp.
"The problem with Woodside is it is a very expensive oil company and because there is always takeover speculation, it is very hard to make the numbers work," a source familiar with the situation told Reuters.
BHP Chief Executive Marius Kloppers is currently focused on wooing Potash shareholders and BHP's own investors in four continents about the merits of the offer.
He is expected to spend the next few weeks shuttling between Europe and North America as he tries to clinch his first major deal after three years on the job.
"They are pretty busy right now, but they are a big company so within six to 12 months of getting one deal done there could be presumably be another one," the source added.
Analysts poured cold water on the notion of a second simultaneous major deal, even for a mining giant with BHP's financial muscle.
"I would have thought it unlikely for BHP to be looking at two large acquisitions at the same time. The size of the two transactions matter," said BT's Barker.
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