September 7, 2010 / 7:07 PM / in 7 years

Sinochem approaches Temasek on Potash bid

<p>A train car waits in line at the Potash Corp's Cory mine site near Saskatoon in this August 19, 2010 file photo. REUTERS/David Stobbe</p>

TORONTO/SINGAPORE (Reuters) - China’s state-owned Sinochem Corp has invited Temasek, the Singapore sovereign wealth fund, to join a consortium that may bid for Canada’s Potash Corp (POT.TO), the world’s largest fertilizer supplier, sources with knowledge of the matter said on Tuesday.

The move follows an order by Chinese officials for state companies to meet investment bankers to explore ways to block BHP Billiton’s (BHP.AX)(BLT.L) $39 billion hostile bid for Potash Corp.

Further raising pressure on BHP to sweeten its bid, Potash Corp said on Tuesday it had contacts with several other parties that had shown interest in possible transactions. It has called the Anglo-Australian miner’s $130-a-share offer “grossly inadequate.”

“A number of third parties have already expressed interest in alternative transactions, some whom we approached and others, who initiated contact on their own,” Potash Corp Chief Executive Bill Doyle said in a video clip posted on the company’s website. (www.potashcorp.com)

China, which typically buys about 7 percent of the output of Potash Corp, fears a BHP takeover might jeopardize supplies it will require to feed its huge population in coming years.

Potash Corp shares on Tuesday rose $1.11 to $149.61 on the New York Stock Exchange, or 15 percent more than the BHP offer price, reflecting anticipation of a higher bid eventually.

Shares of BHP closed down 1.4 percent in London, partly on concerns that Australia’s new Labor government might impose a new resource tax on iron ore and coal miners.

TEMASEK APPROACHED

Singapore’s Temasek, which manages $134 billion in assets, has made no decision on whether it will join a consortium, as proposed by the Chinese chemicals group, one of the sources told Reuters.

It was unclear if a bid to buy a blocking stake or to make a full counter-offer was under consideration.

“The consortium is coming along, but the situation is still fluid,” said the source.

That said, a full bid is more likely, according to a source familiar with the matter, given the experience the Chinese had with Rio Tinto (RIO.L) (RIO.AX),

Rio last year scrapped a $19.5 billion tie-up with Chinese state-owned metals group Chinalco, leading to recriminations that bruised Sino-Australian ties.

Chinalco had earlier teamed with U.S. aluminum producer Alcoa Inc (AA.N) to pick up a 9 percent stake in Rio Tinto and become the miner’s biggest single shareholder.

The move forced BHP to raise an all-share offer for Rio when it went hostile. In the end BHP scrapped its bid, due to the global economic slump and Rio’s $40 billion debt pile, and it never had to resolve how it would deal with Chinalco.

BEHIND THE SCENES

An Asia-based resources banker said a Sinochem-led consortium would have difficulty mounting a successful approach for Potash Corp because of political opposition in Canada. For that reason, a consortium might need to bring in non-Chinese investors to make a bid more palatable.

The banker said other global diversified miners are also exploring potential options behind the scenes.

Temasek, which had high exposure to banks at the start of the global credit crisis, is looking to diversify its portfolio with investments in miners and energy companies.

Earlier this year it agreed to buy $500 million of non-voting convertible preferred shares in Chesapeake Energy (CHK.N) and later invested more in the U.S. utility. [nTOE65K069].

The state investor also bought C$500 million ($483 million) of securities in Canada’s Inmet Mining IMN.TO and $50 million in Platmin Ltd PPN.TO this year.

A Temasek spokesman declined to comment and Sinochem was not immediately available to comment. The sources declined to be identified because the talks are not public.

REGULATORY PROCESS

In the meanwhile, BHP -- the world’s No. 1 miner -- is moving ahead on getting regulatory clearance for the proposed acquisition of Potash Corp.

BHP said that the Federal Trade Commission in the United States was unable to commence its review of the offer until the end of August.

BHP is therefore refiling its notification, that was originally filed on August 20, so as to comply with the Hart-Scott-Rodino Antitrust Improvement Act of 1976.

BHP intends to refile its premerger notification on September 9, which will commence a new 15-day waiting period.

BHP Billiton said it is confident that it will obtain the necessary regulatory approvals for its acquisition of Potash Corp.

Additional reporting by Denny Thomas and Joseph Chaney in Hong Kong; Editing by Frank McGurty

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