BHP sets Potash bid but may need to pay much more

Fri Aug 20, 2010 6:05pm EDT
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By Michael Smith and Euan Rocha

SYDNEY/TORONTO (Reuters) - BHP Billiton formally launched its hostile takeover bid for Potash Corp on Friday but a poll of investors suggested the world's biggest miner would need to significantly raise its $39 billion offer to capture the top fertilizer producer.

Potash Corp is already soliciting bidders willing to pay more than BHP's offer of $130 a share, a source close to the matter said, prompting speculation that China, one of the world's biggest potash importers, may join the fray.

The source said Potash Corp was confident it could attract a competing bid, given the expectation for rising demand for potash, an important crop nutrient.

The shrinking availability of arable land in China and its

limited domestic supply of potash has increased the importance of the nutrient for the world's most populous nation, where a growing middle class is increasing food consumption.

BHP officially kicked off its hostile offer on Friday, taking out full-page advertisements in Canadian and U.S. newspapers. The bid will remain open until October 19.

In its offer, BHP said that if it is successful in taking over Potash Corp, it would ultimately look to pull out of Canpotex -- the marketing conglomerate through which Potash Corp, Mosaic Co and Agrium Inc export the nutrient.

BHP has traditionally shunned arrangements like Canpotex, through which the three big Saskatchewan producers have jointly negotiated pricing on contracts.   Continued...

<p>Potash Corp mill general superintendent Trevor Berg holds a handful of chicklet potash inside the Cory mine facilities near Saskatoon August 19, 2010. REUTERS/David Stobbe</p>