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MELBOURNE/LONDON (Reuters) - BHP Billiton, tried to damp expectations it would sweeten its hostile $39 billion offer for Potash Corp even as the world's biggest miner showed it had the wherewithal to up the ante.
Reporting its richest half-year profit in two years on Wednesday, the Anglo-Australian miner also revealed a hefty balance sheet and annual cash flow of $17.9 billion.
Combined with $45 billion in loans BHP has arranged, the results sent a strong signal that BHP has the financial muscle to raise its $130-a-share offer for Potash Corp, the global fertilizer leader.
But BHP Chief Executive Marius Kloppers sought to discourage the notion that he might enhance a takeover offer that already ranks as the highest of the year.
"I will be as disciplined on this bid as I've been on every other endeavor," the 47-year-old South African said on a conference call with reporters. "The shareholders own the company (BHP), and it's my job to create more value for them, not to do any one thing at any cost."
Kloppers, who is trying to clinch his first major deal after three years on the job, would have ask shareholders to approve an offer above $158.50 a share, or $47 billion, because it would exceed 25 percent of BHP's market capitalization.
Investors have pushed Potash shares 13 percent above the $130-a-share bid, betting that BHP will boost its offer, or a rival bidder will emerge. A Reuters survey indicated Potash shareholders would accept $162 a share.
The stock fell 2.4 percent to $145.50 on Wednesday, the steepest one-day drop since BHP announced its bid.
BHP could probably go up to close to A$200 dollars ($177) a share in its Potash Corp bid, Ric Ronge, portfolio manager at Pengana Capital in Australia, said after the BHP results.
But Paul Galloway, an analyst at Bernstein Research in London, said BHP has no reason to go higher at this point.
"At the moment if BHP raised the bid they would be just bidding against themselves. So really the next move is from Bill Doyle, who claims that he's got an alternative," Galloway said, referring to the Potash Corp CEO. "I think BHP will be waiting to see what that alternative actually is."
The two companies considered big enough to mount rival bids on their own -- Vale and Rio Tinto -- have faded as prospective white knights. Vale pulled itself out of the running, while analysts think Rio has all it can handle after its ill-timed, $38 billion takeover of Canada's Alcan.
Analysts say Potash Corp could still foil BHP by selling assets into a joint venture at a price that implies a higher value for the whole company than BHP has offered, with China's Sinochem as a likely partner.
BHP's said net debt fell 58 percent from the end of last year to $3.3 billion, with net gearing down to a relatively scant 6 percent. That bodes well for a company willing to take on more debt to finance its Potash foray.
But analysts say there is no sense in rushing.
"In the absence of another bidder for those assets, BHP is doing the right thing in the sense it's basically offered a price...and is waiting for a response," said Pengana's Ronge.
Kloppers hinted that a higher offer would have to wait until BHP got regulatory approvals for its takeover plans.
"We'd like to, on the Potash transaction, clear the preconditions so that we've got a bid that is capable of being accepted. That's what you should look forward to as we proceed through the remainder of this calendar year," he said.
Some shareholders worry about risks BHP will assume if it acquires Potash Corp and expands into a new market. BHP aims to tap an expected boom in demand for potash from farmers trying to boost crop yields to feed countries like China and India.
"The question is not whether BHP can afford the bid. It's whether there's a strategic fit," said an investor who declined to be identified ahead of talking to Kloppers.
Kloppers said he and other executives are due to embark on a four-continent tour to talk to its investors, about half of whom overlap with Potash shareholders in North America.
In the first half, BHP's profit before one-time items rose to $6.77 billion from $4.59 billion a year earlier, slightly less than the average analyst forecast of about $6.9 billion.
BHP shares in London dipped 2 percent, in line with the UK mining index as metals prices slid.
BHP's bumper profits came as the U.S. Securities and Exchange Commission charged two Spanish residents, one of them an equities derivatives trader with BHP adviser Banco Santander, with insider trading in Potash shares. The bank later suspended the employee.
The SEC alleged the two made nearly $1.1 million in profits using nonpublic information to trade Potash securities before the bid.
BHP plans to ask a Canadian commission to end Potash's "poison pill" takeover defense early if the bid appears likely to receive regulatory approval, sources familiar with the matter said.
That would force the Canadian company to work faster as it seeks to line up a white knight to fend off the bid.
Kloppers also sought to allay concerns that he will pull out of Canpotex, the North American potash marketing consortium, if BHP wins Potash Corp. The group, which includes Mosaic Co and Agrium, has helped support global potash prices.
"The message is we will only transform it (Canpotex) if the other shareholders want to transform it," he said.
Agrium CEO Mike Wilson said BHP would be crazy to leave the marketing consortium. "It's one of the strongest marketing arms I've ever seen, one of the best distribution groups I've ever seen," he told Canada's BNN business television. "Speaking from an Agrium point of view, we're going to stay and we think BHP would be crazy to leave it."
Additional reporting by Julie Crust, Rachelle Younglai and Sonya Dowsett; Writing by Frank McGurty; Editing by Lincoln Feast, Erica Billingham and Michael Shields