BHP profit jump could dampen rivals in Potash bid
By Sonali Paul
MELBOURNE (Reuters) - BHP Billiton's monster earnings expected this week could strengthen its hand in its $39 billion bid for fertilizer group Potash Corp and intimidate any rival bidders.
The world's biggest miner is set to report a 50 percent jump in second-half profit to $6.9 billion on Wednesday, sending a loud warning shot toward Potash, which is trying to line up white-knight bidders to fend off the world's largest miner.
"Clearly it's going to be a very good result ... The balance sheet is in excellent shape and the cash flow will be significant," said James Bruce, a portfolio manager at Perpetual Investments, which owns BHP shares.
On Monday, Potash, the world's biggest fertilizer company, talked up the chances of a counterbidder, in a move analysts said might be aimed at coaxing a higher bid from BHP.
Canada's Globe & Mail newspaper web site, citing unnamed sources, said global miner Rio Tinto might be considering a bid for Potash with a Chinese partner.
Yet investors, analysts and bankers have played down the chances of Rio bidding for Potash as it has only just slashed $40 billion in debt from an ill-timed takeover of Alcan in 2007 and plans to spend $13 billion on projects through 2011.
"I would be very surprised," said Adam Dixon, portfolio manager at Ausbil Dexia, which owns BHP and Rio shares.
"Rio has a very full pipeline of organic growth opportunities. Coupled with this, the company is still busily integrating the Alcan business that it bought not so long ago," he said. Continued...